Climate Change and Sustainable Energy Bill

Public Bill Committee, 25 January 2006.

Climate Change and Sustainable Energy Bill - Standing Committee C

Climate Change and Sustainable Energy Bill

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I beg to move,

That, if proceedings on the Climate Change and Sustainable Energy Bill are not completed at this day’s sitting, the Committee do meet on Thursday 9th February at Two o’clock.

I welcome you to the Chair, Mr. Benton. I am sure that under your guidance we will have a productive and interesting sitting today, and perhaps on a future day, too. I declare as an interest the support that I have received from the Sustainable Energy Partnership and its constituents, in terms of advice and campaigning for the Bill. I also advise the Committee that I am currently involved in a number of events to do with the possible development of a community energy project in Edinburgh, and I have offers of support for those events from Co-operative Financial Services, Scottish and Southern Energy and Forth Ports; even though the relevant clause of the Bill does not apply to Scotland, I thought it appropriate to draw that to the Committee’s attention.

It appears that, for a number of reasons, which I explained to the Front-Bench representatives, we have acquired a second sitting, and that is why I have moved the sittings motion.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I beg to move,

That the Climate Change and Sustainable Energy Bill be considered in the following order, namely, Clauses 1 to 4, Clauses 6 to 14, new Clauses, new Schedules, Clause 5, remaining proceedings on the Bill.

The purpose of the order of consideration motion is to allow ongoing discussions, particularly on clause 5, to continue, and perhaps to allow an outcome to be reached that might be of benefit to the Committee.

Clause 1 - Purposes

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I beg to move amendment No. 17, in clause 1, page 1, leave out line 12.

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss Government amendments Nos. 1 to 9.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

As the Committee will be aware, clause 1 sets out the definitions of the persons and bodies who will carry out functions under the Bill, and the factors that they have to take into account. Clauses 2 and 3 place specific duties on the Prime Minister and the Chancellor. Hon. Members will be aware that the clauses to which the amendments refer are those that the Government expressed concerns about on Second Reading. There has been considerable discussion between me, the Government and other bodies in light of those concerns. I have accepted that it is necessary to move an amendment today to take account of those concerns.

Clause 1 refers to the Prime Minister, but it is appropriate to remove that reference at this stage. The intention of the Government amendments is to replace reference to the Prime Minister with reference to the Secretary of State—effectively, the Secretary of State for Environment, Food and Rural Affairs. I must say that I would have preferred the reference to the Prime Minister to remain, because it would have emphasised that tackling climate change is at the centre of what the Government are doing. However, that is not a reflection on any of the individuals who currently hold the relevant posts. The current Prime Minister is certainly recognised for putting tackling climate change at the centre of Government policy in many ways, but the Secretary of State for Environment, Food and Rural Affairs has similarly been recognised for the leadership that she has shown both nationally and internationally on those issues. Nevertheless, I should have preferred to retain the reference to the Prime Minister, but I accept the necessity of proceeding co-operatively and recognise the Government’s good intentions in that respect. I am therefore prepared to commend the amendment to the Committee.

During debate on the amendment, there will no doubt be discussion of the specific responsibility of the Chancellor of the Exchequer, which is the subject of clause 3. Indeed, amendment No. 16 would remove reference to the Chancellor from clause 1. Just as I recognise the important role of the Prime Minister in the matter, I recognise the important steps taken by the Government, particularly the Chancellor of the Exchequer, in introducing VAT reductions to encourage energy efficiency, enhanced capital allowances and measures such as the landfill tax, climate change levy and renewables obligation.

I do not associate myself with the conclusions in the briefings circulated for the Committee by some outside organisations that have criticised the achievements of the Treasury in those respects. However, in my view, other measures could be utilised. It would be helpful if the Bill mentioned how the Treasury could ensure that it focused every year on measures to tackle climate change. None the less, I understand the Government’s concerns, so I shall accept both the amendment tabled by my hon. Friend the Member for Southampton, Test (Dr. Whitehead) and Government amendment No. 10, which removes clause 3.

Joe Benton (Labour, Bootle)

Order. I point out to the hon. Gentleman that he is anticipating future debates.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

As you rightly point out, Mr. Benton, that is not a matter that I can discuss at length now. With regard to the amendments before us, I ask again that the Committee support amendment No. 17, as well as amendment No. 16, which my hon. Friend the Member for Southampton, Test will move in due course.

Malcolm Wicks (Labour, Croydon North)

I welcome you to the Chair of our proceedings, Mr. Benton, which might last for a sitting or two. Hopefully, in the interest of energy efficiency, they will not last much longer, although that will be for the Committee to determine.

Before I speak to the amendment, I should like to express sincere thanks to my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) for his continued hard work on this important Bill, which the Government support in principle, although we seek to amend it in a number of ways. We have held constructive discussions since Second Reading on 11 November last year. My Department and I have enjoyed working with my hon. Friend to get the Bill, we hope, on to the statute book. I am especially grateful for the way in which he has worked closely with several Departments to devise amendments addressing the Government’s concerns about the Bill in its current form.

The purposes of the Bill, as outlined in clause 1, are fully in line with existing Government objectives. The Prime Minister has described climate change as

“the world’s greatest environmental challenge”.

Although politicians often wax lyrical on their chosen subject, calling it the greatest challenge facing the earth, for once the proposition is not an exaggeration. The Government have made significant strides in achieving the ambitious goals of our energy policy. We are on track to meet the Kyoto targets for cutting greenhouse gas emissions. The renewables obligation and the climate change levy exemption will result in support to renewables of £1 billion a year by 2010. As a result of the renewables obligation, last year saw the largest amount of renewable generation ever installed in the United Kingdom.

During the past 18 months, interest in microgeneration, the subject of the Bill, has grown. Before the Energy Act 2004 took effect, microgeneration was a concept understood by only a few specialists. Now it is almost a household term. Perhaps, by way of declaring an interest not in a parliamentary but a more general sense, I should declare that my family is investigating the possibility of having a micro-wind turbine at our dwelling. I shall bring you up to date, Mr. Benton, as events transpire. Even The Times, I am told—I do not read the tabloids myself—is running stories claiming that domestic wind turbines are the new iPod, although at the moment I lack any interest in having one of those.

Last summer, we held a wide-ranging consultation to gather views on what the Government needed to do to promote microgeneration more effectively. Some time before April this year, we shall publish our microgeneration strategy, which will aim to remove the barriers currently preventing the development of a sustainable market in those new technologies.

We are not complacent. On Monday, I launched the consultation phase of our energy review, which will consider what measures are needed by 2020 and beyond to tackle climate change and ensure secure and affordable energy supplies in the UK. No one could argue with the primary purpose behind tackling climate change, nor with the secondary purposes of alleviating fuel poverty and ensuring diverse and viable long-term energy supplies.

On Government amendments Nos. 1 to 9, as I said on Second Reading in November, the Government have led from the front, domestically and internationally, on climate change. We are happy to report to Parliament on the UK’s progress towards its domestic and international greenhouse gas emission reduction targets.

If the amendments are agreed to, the Secretary of State will report annually on the steps taken by UK Government Departments during the previous calendar year to reduce their greenhouse gas emissions, and on the UK’s emissions figures for the same period. That particular period has been selected as it aligns with the UK’s reporting commitments to both the European Union and the United Nations framework convention on climate change.

I accept that some believe that as head of the Government, the Prime Minister should deliver the report. However, I feel that the Secretary of State for Environment, Food and Rural Affairs, who leads for the UK on this issue, should give the report. I assure the Committee that all relevant central UK Government Departments, including my own, will work with the Department for Environment, Food and Rural Affairs on the production of the report, as they do with the other reports that the UK has to prepare to meet its international reporting obligations.

The amendments also clarify what measures need to be included in the report. By amending the reference to “government”, which becomes “government departments”, amendment No. 3 confirms that clause 2(1)(a) refers only to the steps taken by this Government, and not to those of the devolved Administrations, non-departmental agencies or local councils. That amendment does not affect clause 2(1)(b), which relates to the levels of greenhouse gas emissions; those will still be reported for the UK as a whole.

Amendment No. 8 would delete clauses 2(1)(2) and 2(1)(3), which would require a motion for resolution for approval of the report in both Houses. Both Houses have many opportunities to discuss climate change during the normal course of business, without requiring a specific motion in relation to this report.

Amendment No. 17 removes the Prime Minister from the list of relevant bodies to which the Bill applies. In light of the amendments just discussed, which remove references to the Prime Minister, there is no requirement to mention him in this clause. That sounds a bit rude, but I think that Committee members have the drift of my argument.

Gregory Barker (Conservative, Bexhill and Battle)

I, too, welcome you to the Chair, Mr. Benton. I am delighted to speak on behalf of the official Opposition on this Bill.

I pay tribute to and congratulate the hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) on his success. It is no mean feat to introduce a private Member’s Bill; first, one has to be lucky and come up in the ballot, then one has to get the Bill off the Floor of the House of Commons and into Committee, sailing through all the obstacles that present themselves. That is a great feat. He is by no means there yet, but the evident skill with which he has dealt with the Opposition parties and the Government—in a constructive and consensual way at all times—is a great credit to him. Given that approach, the Bill stands the best possible chance.

Climate change is important to everyone in this room, to everyone in the country and, indeed, to the whole world. The Bill is about two major issues that we face—climate change and fuel poverty—and about Government accountability on those issues. It is easy, when confronted with such large issues, to resile from specific actions that one can take personally or for which one can hold the Government to account.

The Bill is good because it is also about solutions: microgeneration, community energy, renewable heat and sustainable energy generally. I associate myself with the Minister’s remarks about microgeneration, which is incredibly exciting. I am sorry that, in the terms in which the energy review has been framed, a greater emphasis has not been placed on microgeneration. I therefore greatly welcome the Bill.

At the moment, one sees the possibilities for this country’s future energy supplies based on a perhaps false argument about nuclear versus imported gas, or nuclear versus large-scale, commercially generated renewables. Let us imagine the possibilities if a far greater proportion of our energy requirements were generated by communities, or even by householders or individuals. The possibilities of microgeneration are enormous. It might be the technology of the 21st century just as nuclear was the coming and hopeful technology of the 20th century. I certainly hope so.

All the Bill’s solutions have a theme: they involve people, communities, local authorities and trade associations—in short, they involve people everywhere. That theme flags up another important issue that the Bill is all about. The campaign in support of it has involved people, councils, national and local organisations, advice centres, business leaders throughout the country and, of course, very important work by non-governmental organisations. The campaign has been people-led.

Joan Ruddock (Labour, Lewisham, Deptford)

I remind the hon. Gentleman of the contribution of Members of Parliament. Encouraged by the NGOs, 320 MPs signed the early-day motion proposing a requirement for annual reporting. I think that a former Secretary of State for the Environment from the hon. Gentleman’s party contributed to that early-day motion, as did former Ministers from my party.

Gregory Barker (Conservative, Bexhill and Battle)

That is absolutely right. This has been a parliamentary movement that has reflected the hopes, aspirations and concerns of the wider public. We must not forget that the Bill is a parliamentary occasion spearheaded by parliamentarians trying to make changes. Given the widespread support for the Bill in and outside Parliament, and given that it has already come so far for a private Member’s Bill, it is perhaps a great shame that at this critical point the Prime Minister and the Chancellor of the Exchequer should choose to dissociate themselves—

Joe Benton (Labour, Bootle)

Order. I have allowed general remarks because the hon. Gentleman is making his first contribution to the debate, but I have to point out that we are debating amendment No. 17 and Government amendments Nos. 1 to 9.

Gregory Barker (Conservative, Bexhill and Battle)

You are absolutely right, Mr. Benton. I was endeavouring to make the point that, at this moment, the Prime Minister and Chancellor have chosen to dissociate themselves from the Bill by requiring their names to be removed from the clause under consideration. The Prime Minister has done a great deal of work to put—

Joan Ruddock (Labour, Lewisham, Deptford)

I should not like it to go on the record that the Prime Minister and the Chancellor had dissociated themselves from the Bill. It has been decided in discussions that it would be more appropriate to include the Secretary of State. The hon. Gentleman personalises the issue a little too much; I think he will find that the Prime Minister and the Chancellor are in favour of the Bill.

Gregory Barker (Conservative, Bexhill and Battle)

They have not chosen to dissociate themselves from the Bill, but they have certainly chosen to dissociate the offices that they hold from inclusion in it.

Michael Weir (Scottish National Party, Angus)

Does the hon. Gentleman agree that given that two of the Bill’s functions are to alleviate fuel poverty and to secure a diverse and viable long-term energy supply, both of which are under the control of the DTI, the Bill is cross-departmental and it would therefore be better if the Prime Minister and the Chancellor reported on it from the centre of the Government than let departmental leaders fight over it?

Gregory Barker (Conservative, Bexhill and Battle)

I agree entirely. Often the biggest problem is the lack of cross-departmental co-operation. That is not the result any deliberate intent on the part of any Department; it is simply the way in which Whitehall often operates, or fails to operate effectively. It is only when the Prime Minister or the apparatus of No. 10 are personally involved that we really get results. The Prime Minister has spoken of global warming and climate change as the greatest threat that the planet faces in the 21st century. I think we all agree on that. Surely he is therefore required to put the weight of his office behind measures to combat climate change.

Greg Clark (Conservative, Tunbridge Wells)

Is not my hon. Friend’s point reinforced by the—[Interruption.]

Joe Benton (Labour, Bootle)

Order. May I ask members of the Committee to ensure that their telephones are switched off?

Greg Clark (Conservative, Tunbridge Wells)

The hon. Member for Lewisham, Deptford (Joan Ruddock) said that the Chancellor and the Prime Minister have not personally dissociated themselves from the Bill, but does not that illustrate the problem? In effect, the amendments before us have been tabled on behalf of the Government. I am sure that the Chancellor and the Prime Minister are blissfully unaware of what has been done in their name. The point of mentioning them in the Bill is that, unlike today, when they give their report they will be personally aware of the situation.

Joe Benton (Labour, Bootle)

Order. Before the hon. Member for Bexhill and Battle (Gregory Barker) replies to that intervention, I shall say that I think we ought to be getting back to the amendment. Debate on the Prime Minister’s or Chancellor’s attitude has very little to do with amendment No. 17. I shall allow a reply, but then we must get back to the amendments.

Gregory Barker (Conservative, Bexhill and Battle)

I entirely agree. The issue is not one of personalities; nobody doubts the Prime Minister’s intent. We are trying to find the most effective mechanism—the right way to implement the Bill, make it effective and make the Government accountable for its implementation. There is a strong feeling that that will happen only if accountability spans more than one Department and stems from the highest level of government.

Opposition Members do not wish to strike a discordant note. We welcome the Bill’s progress and do not wish to hold it up unnecessarily. If the Government are firm on the matter, we will, with reservations, not press it.

Malcolm Wicks (Labour, Croydon North)

I should like to make two small points. First, the fact that I, a DTI Minister, am proposing that the Secretary of State for Environment, Food and Rural Affairs take the lead on the matter shows how joined-up we are. Secondly, although it is a good debating point, does the hon. Gentleman accept that the Prime Minister cannot lead with reports or whatever on every one of the vital issues facing our nation? Our departmental system is such that one Department must take the lead.

Gregory Barker (Conservative, Bexhill and Battle)

I think that that is right, but with regard to the Prime Minister’s involvement, climate change is either the greatest threat facing the planet in the 21st century or it is not. Perhaps the Minister would like to tell the Committee what other greatest threats there are. If the Government are serious about climate change, which I believe they are, they should commit themselves at the highest levels—that would send a clear message—rather than shuffle the issue down the hierarchy.

Malcolm Wicks (Labour, Croydon North)

I do not want to tease too much, but if that point about responsibility is true, why is the Leader of the Opposition not leading in Committee?

Gregory Barker (Conservative, Bexhill and Battle)

My right hon. Friend may not be leading, but he has put his A team in the Committee. As the Minister well knows, the Leader of the Opposition raised the matter at his first Prime Minister’s questions and it was the subject of the first Opposition day debate. It is something that we take seriously. I do not want to get into that sort of game. We are simply talking about the most effective way of implementing a worthwhile Bill. With those remarks, I shall sit down.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I welcome you to the Chair, Mr. Benton. I, too, congratulate the hon. Member for Edinburgh, North and Leith on steering the Bill to its present stage and I look forward to our discussions. I wish the Bill a fair wind and hope for a successful outcome without too much delay.

If I may, Mr. Benton, under your firm chairmanship, I shall refer briefly to the Minister’s paper “Our Energy Challenge”, which is my text for today. On page 5 he says:

“Increased energy efficiency is a central public policy goal, but the pace of efficiency improvements has been slower than needed”.

We regard the Bill as a way to speed up that pace, so when we read amendment No. 17, to which I know you want me to speak, Mr. Benton, it is a pity to see that the first time we get the foot near the accelerator, the Government immediately take it off and say “No, not the Prime Minister. Let’s leave it to the Secretary of State.” I give credit to the Minister for his urbane and disarming manner—he certainly disarmed the Conservative spokesman.

Malcolm Wicks (Labour, Croydon North)

I should not say this, but we fully understand why the Leader of the Liberal Democrats cannot be here today.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I certainly appreciate the Minister’s understanding. If I had the understanding of others, it would be even better.

The problem with the amendment tabled by the hon. Member for Edinburgh, North and Leith in response to Government pressure and with the Government’s substitute amendments is that they lower the degree of accountability for progress on an important subject. To take out the Prime Minister is to accord the issue lower priority and less accountability. The Government amendment—I think that I am in order if I talk about that, too—not only lowers accountability but lowers the level of discussion, because it makes the matter one for press releases and subsequent reviews rather than for debate on the Floor of the House.

In supporting this string of amendments, the Minister said that the Government were handing over responsibility for the Bill to the Secretary of State for the Environment, Food and Rural Affairs and that was the proper approach. I put it to him, as the hon. Member for Bexhill and Battle has done, that his own Department has an important role to play, as he acknowledged; the Treasury has an important role to play—that is the subject of the next string of amendments; and the Office of the Deputy Prime Minister has an important role to play. My own private Member’s Bill on a similar subject, the Sustainable and Secure Buildings Bill, which received Royal Assent in September 2004 and falls within the purview of the ODPM, is stalled because of the lack of action in the ODPM.

Unless we have oversight of this whole issue, with the Prime Minister not simply wishing other people well, but taking a lead role, getting on with it himself, taking oversight and pulling people up when things are going short, I fear that this Bill, like mine, will languish, with the powers in existence but no exercise of them in sight. I hope that the Minister will take note of his own comment that

“the pace of efficiency improvements has been slower than needed”.

It is disappointing to find that, with amendment No. 17 and the associated amendments, that pace is slowed down, when it could be accelerated.

Michael Weir (Scottish National Party, Angus)

I also welcome you to the Chair, Mr. Benton, and apologise for being slightly late for the start of the Committee.

I also congratulate the hon. Member for Edinburgh, North and Leith on introducing the Bill. It is perhaps a testament to his ability that he has managed to get agreement between Scottish Labour Members and Scottish National party Members, who have been known to fall out on occasion.

I was slightly alarmed to hear the Minister say that wind turbines were the new iPods, given my children’s constant demands for the latest iPod. I hope that that does not mean that we will constantly be paying for turbines as well.

It is regrettable that amendment No. 17 would remove the Prime Minister from the Bill. As I said in my intervention on the hon. Member for Bexhill and Battle, the matter is a cross-departmental one. Subsection (2)(b) talks about the

“desirability of alleviating fuel poverty,”

and subsection (2)(c) about

“the desirability of securing a diverse and viable long-term energy supply.”

Clearly those are matters for the Department of Trade and Industry rather than the Department for Environment, Food and Rural Affairs—indeed, the energy review is being carried out by the DTI. As the hon. Member for Edinburgh, North and Leith pointed out, the Treasury is also involved through fiscal instruments dealing with climate change and generation. The Chancellor’s pre-budget report made a great deal out of the £200 fuel payment to pensioners to alleviate fuel poverty. Many Government Departments are involved with the issue.

There is cross-party support for the Bill, and I hope that it will progress successfully and evade any ambushes on Third Reading. It would be useful if the Prime Minister took the lead to show that Parliament is united on climate change and agrees that it is the greatest threat facing the country. A clear signal would be sent to the country if the Prime Minister were under a duty to report to Parliament, but unfortunately that is not to happen. Like the hon. Member for Bexhill and Battle, I want the Bill to proceed and so I will not press the matter to a Division, but I think that the amendment is regrettable.

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment No. 16, in clause 1, page 1, leave out line 13.

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss the following: Clause 3 stand part.

New clause 1—Fiscal and economic measures—

‘(1)The Chancellor of the Exchequer must at least once in every year consider ways in which fiscal and economic measures may be used to assist with microgeneration and energy efficiency.

(2)The Chancellor of the Exchequer may, if he considers it expedient to do so, discharge his duty pursuant to subsection (1) as part of the budget process.

(3)The Chancellor of the Exchequer shall publish the results of his considerations pursuant to subsection (1) in any way that he thinks fit.

(4)This section shall come into force on 1st April 2007.’.

New clause 12——Annual reports by Chancellor of the Exchequer

(1) The Chancellor of the Exchequer shall each year lay before Parliament a report on the CO2 impact of any fiscal or economic measures to promote energy efficiency and microgeneration introduced by him in the previous five years. (2)In this section the term “CO2 impact” means the annual reduction or otherwise of emissions of carbon dioxide as a result of each specific measure.’.

Alan Whitehead (Labour, Southampton, Test)

I welcome you to the Chair, Mr. Benton. I, too, am in the latter stages of installing a wind turbine on my house, but unfortunately I already possess an iPod.

I congratulate my hon. Friend the Member for Edinburgh, North and Leith on getting the Bill to Committee stage. He has negotiated a careful passage over the shoals, tides and subterranean logs of controversy. I understand that he can see the Forth bridge from his constituency boundaries; that bridge might serve as a metaphor for the passage of the Bill over troubled waters and into Third Reading.

Amendment No. 16 follows the logic of the previous amendment in that it will remove subsection (3)(b) with its reference to the Chancellor of the Exchequer. However, the Chancellor will have specific duties under a later clause, which perhaps puts the deletion in a different light. The clause requires him to consider measures that might be taken and ways that he might discharge his duties under subsection (1) as part of the Budget process. Not only does the amendment follow the logic of my hon. Friend’s amendment relating to the Prime Minister, but it leads us on to new clause 1, to which my hon. Friend will be speaking this afternoon.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I think that I would be right to move new clause 1 at this stage. Perhaps you will advise me, Mr. Benton.

Joe Benton (Labour, Bootle)

The advice is that new clause 1 is being taken with the amendment, so referring or speaking to it is appropriate; if and when you decide to move that it be added to the Bill, that will be done at the appropriate point of our proceedings.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I appreciate that, Mr. Benton. I shall move the new clause at the appropriate stage. Before you correctly drew me to order in the discussions on the previous amendment, I expressed my view on the role the Chancellor of the Exchequer should play, so I will not reiterate what I said earlier.

I appreciate the fact that the Government have put measures to tackle climate change at the centre of many of their economic and fiscal policies. I do not wish to detract from that. I understand that one of the reasons that the Government are unhappy with clause 3, which we are debating, is that the requirement would be taken outside the Budget process. For that reason my new clause would make clear that the process of consideration of fiscal or economic measures could be undertaken in the Budget process, if the Chancellor so wished.

When we come to make a decision on new clause 1, I hope that the Government will have reconsidered the way forward. In any event, I appreciate that steps have been taken, but a focus would be helpful, as originally set out in my clause 3, but now in a revised format in new clause 1.

Gregory Barker (Conservative, Bexhill and Battle)

I should like to speak to new clause 3 and to refer to new clause 12, which I tabled, if that is in order. [Interruption.] I meant to say clause 3.

Joe Benton (Labour, Bootle)

The items that we are discussing with amendment No. 16 are clause 3 stand part, new clause 1 and new clause 12.

Gregory Barker (Conservative, Bexhill and Battle)

Thank you for that clarification, Mr. Benton.

Clause 3 requires the Chancellor to

“annually ... prepare and publish a report on such fiscal measures he considers appropriate to assist with microgeneration and energy efficiency”.

The report should also have regard to dealing with climate change and fuel poverty.

We now understand that the Government want to delete the clause and not to replace it with anything at all. Repeated attempts by the Micropower Council and the Sustainable Energy Partnership to meet officials to try to agree a differently worded clause have been rebuffed. Why should that matter? It matters a great deal, because as we all know, the Treasury is the engine room of government. There is no Department that the Treasury’s tentacles do not reach into, and there is no agenda in government that will be advanced without the wholehearted support of the Treasury. That has nothing to do with the personality of the Chancellor of the Exchequer of the day, but is the reality. The Treasury is the be-all and end-all Department in Whitehall. If the Treasury does not will something, ultimately it will not happen. It is vital that climate change measures are wholeheartedly endorsed and properly agreed by the Treasury.

Let us begin by assessing the importance of the clause in terms of climate change. According to DEFRA figures, overall CO2 emissions between 1990 and 1997, the last seven years of Conservative government, dropped from 159.6 million tonnes to 150 million tonnes. From 1997 to 2004—I believe that this is the last figure available—emissions increased to 158.4 million tonnes. The 2005 projections are even higher. There is no room for backsliding or complacency. Treasury engagement is not only desirable, but essential.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I want to put on record my appreciation of the hon. Gentleman’s support for my Bill, but in relation to the last point on carbon savings—my hon. Friend the Member for Southampton, Test asked the Prime Minister about this only a couple of hours ago—the Government’s policy on the climate change levy has resulted in millions of tonnes of carbon savings. It is a policy that the hon. Gentleman’s party still refuses to support—or at least it did at 3.10 pm today.

Gregory Barker (Conservative, Bexhill and Battle)

We are considering the climate levy now as part of a policy review. We have consistently opposed the levy in the past because we have not considered it effective: it has made little contribution to lowering carbon emissions and we have been concerned about its impact. However, we are willing to look at it again and are preparing to do so, and the matter will certainly be reviewed, so it is not strictly accurate to say that we continue to oppose the levy. However, given that the levy has not effectively tackled carbon emissions—the figures speak for themselves—it is right for us to look at the policy rigorously before changing tack.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I wonder whether the hon. Gentleman has yet reached page 30 of the document that the Minister published yesterday, which states that the climate change levy

“should save over 3.4 million tonnes of carbon ... per annum by 2010, well above the estimates made at its introduction.”

Would that also contribute to the hon. Gentleman’s party doing a U-turn on this policy?

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman makes a valid point. If what he refers to is the case—I am sure that it is, as it features in a Government document—it will be a contributing factor in reassessing the effectiveness of the climate change levy. We have no ideological objection. We are concerned about whether the levy has the right outcome on climate change and is a worthwhile trade-off for the additional burden that it places on business. That is the sole basis on which it will be judged, and further information will clearly be taken into account.

However, that is a slight red herring in this context. What we are now discussing, as I am sure you might like to remind me, Mr. Benton, is the clause that takes out the Treasury’s accountability in this matter. We seek to put it back.

The Treasury has had a great deal to say on climate change and energy efficiency. Paragraph 7.21 of the 2002 Budget report states:

“The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing fuel poverty and carbon emissions.”

In 2003, the same paragraph of the Budget report said:

“The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing carbon emissions and alleviating fuel poverty.”

In 2004, the Budget report said:

“The Government’s Energy White Paper highlights the key contribution that energy efficiency can make to the Government’s energy policy goals”.

It also said that improving energy efficiency was the most cost-effective way of reducing greenhouse gas emissions and reducing fuel bills. We would all agree with that. In 2002 and 2003, the Treasury held a consultation on economic measures to improve domestic efficiency. There was a further consultation in 2004 on such specific measures. In 2005, there was a stakeholder consultation on green landlords schemes to improve energy efficiency in the private sector.

For all those consultations, fine words and doffing the cap to the need to take real action, there has been very little follow-up. In the 2002 Budget, we saw enhanced capital allowances for investment in heat pumps, air heaters and solar heaters, 5 per cent. VAT on grant-funded installation of factory insulated hot water tanks, micro-CHP and renewable energy heating systems. That is welcome. The 2003 Budget, however, simply announced a second consultation on specific measures. The 2004 Budget announced 5 per cent. VAT on ground source heat pumps and micro-CHP, conditionally subject to trials. The landlord’s energy savings allowance—LESA—was also set up, although that was not exactly a radical approach. In 2005, 5 per cent. VAT on micro-CHP was confirmed on air source heat pumps, the LESA was extended to solid walls and further consideration was given to green landlord schemes.

Important as those few initiatives are, they do not add up to a very great deal. They give some VAT relief for microgeneration, which is important, and they encourage energy efficiency among private landlords, which is also welcome and important, but those fiscal measures affect relatively few people. They certainly do not affect the vast majority of the public. At the moment, although we all hope the situation will change, microgeneration is still very much a niche product. Relatively few private landlords will act as a result of the green landlord scheme, and most householders are not even affected by the measures that the Treasury has taken during the past five years, despite the consultations and policy priority that the matter has been given.

Let us compare the Treasury’s fine words about how energy efficiency is key in its actions, which affect only a small proportion of people, with the emissions figures that I have quoted, which have gone up, up, up. On energy efficiency, there is an unanswerable case for the Chancellor to consider and report annually what steps he should take to improve the take-up of insulation and other measures by the vast majority of householders. All these schemes and initiatives must go mainstream. The time for small-scale, trialled niche offerings is over. We must mainstream such ideas, or we simply will not make progress.

We will soon have a microgeneration strategy, which I look forward to. The Government claim to support the Bill to help that nascent industry, but why should the Treasury be exempt? It will be key if the strategy is to work. Will the Treasury do nothing? This is not true joined-up government, and it does not put the environment at the heart of the Government’s agenda. At best, it is a piecemeal approach; at worst, some people would say that it is a sham. Bearing in mind the emissions figures, one would hardly take a charitable view.

Nick Hurd (Conservative, Ruislip - Northwood)

Does my hon. Friend agree that our current centralised energy system contains an enormous amount of waste, and that in the pursuit of energy efficiency, we should seek the lowest cost solution to the challenge of climate change? In that context, does he not share my puzzlement as to why any responsible Treasury Minister or Chancellor of the Exchequer should resist the opportunity to come to Parliament and make him or herself accountable for the pursuit of efficiency?

Gregory Barker (Conservative, Bexhill and Battle)

Absolutely. There ought to be tablets of stone with “efficiency” written across them at the Treasury portal. I am surprised that Treasury Ministers do not want to discuss on the Floor of the House efficiency measures that will procure long-term savings. It is regrettable that the Treasury and financial strategy will not be at the heart of climate change policy. They will not be at the heart of that policy unless the Treasury is held accountable on the Floor of the House.

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman might acknowledge that the Government as a whole are undertaking a climate change review designed specifically to put us back on track. Clearly, that will involve the Treasury and fiscal measures; we must assume that. The Treasury is also undertaking the Stern review of the economics of climate change. Does the hon. Gentleman support new clause 1, which would go a long way towards creating the proposals that he wishes to see in the Bill?

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Lady is right. A number of measures have been introduced that seek to tackle climate change, for which we applaud the Government, and I do not doubt that there will be more measures in the future. Surely that is all the more reason why the Treasury, which has overarching responsibility for all such things, should be accountable. If so, it can give a joined-up account from the top of Government as to how measures will be implemented now and in future and what their fiscal impact will be.

I agree with the hon. Lady that a range of measures are being implemented. We need more, and we need them to be implemented with greater urgency. Nevertheless, that simply reinforces the case that we need all the issues to be considered, taken together and deliberated on by the Treasury, that most important of Departments. Otherwise, by the very nature of having so many measures and initiatives, there will be a danger of incompatibility or of losing sight of what the Government have started. We need the Treasury to drive the whole process from the top.

Greg Clark (Conservative, Tunbridge Wells)

The hon. Member for Bishop Auckland (Helen Goodman) and I serve together on the Select Committee on Public Accounts. The removal of the clause would also remove the Treasury from the scrutiny of the Public Accounts Committee in terms of the execution of the policy. From time to time, that Committee finds an effective way of making sure that the Government deliver on their promises.

Gregory Barker (Conservative, Bexhill and Battle)

That is an excellent point, which goes to the heart of accountability.

New clause 12 states:

“The Chancellor of the Exchequer shall each year lay before Parliament a report on the CO2 impact of any fiscal or economic measures to promote energy efficiency and microgeneration introduced by him in the previous five years ... In this section the term ‘CO2 impact’ means the annual reduction or otherwise of emissions of carbon dioxide as a result of each specific measure.”

The Government support annual reports by the Secretary of State for Trade and Industry on microgeneration and by the Deputy Prime Minister on achieving the domestic energy efficiency target under the Housing Act 2004. In the Sustainable Energy Act 2004, the Government support annual reports to Parliament on measures to reduce CO2 by the Secretary of State for Environment, Food and Rural Affairs. There is not a principle at stake here.

Nowhere is there any requirement for the Treasury to report on its contribution. Seemingly, the Chancellor is unaccountable when we come to combating climate change. I am not speaking about whether that is deliberate, but as my hon. Friend the Member for Tunbridge Wells (Greg Clark) pointed out, it makes the Chancellor more unaccountable, which will help stifle debate.

Helen Goodman (Labour, Bishop Auckland)

Will the hon. Gentleman explain why he has included in the new clause the phrase:

“introduced by him in the previous five years”?

Presumably, the hon. Gentleman is hoping that his hon. Friend the hon. Member for Tatton (Mr. Osborne) will be Chancellor of the Exchequer, but under the new clause, he would be reporting on the current Chancellor’s actions, not his own. The new clause makes sense only as long as we have a continuation of a Labour Government, which of course I hope and believe we will.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Lady raises an interesting drafting point, but it is not a serious one or what the debate is about. We are not here to consider the result of the next general election. We are trying to take a long-term view on the best way to tackle climate change.

All I am saying in the new clause is that if we are all serious in tackling climate change, then for goodness’ sake the Treasury must also play its role and be held accountable.

Joan Walley (Labour, Stoke-on-Trent North)

Will the hon. Gentleman tell the Committee, in the context of the amendment that we are debating, how what he is saying is consistent with new clause 1? The new clause deals with the way in which the Chancellor of the Exchequer at least once in every year considers ways in which fiscal and economic measures might be used to assist microgeneration and energy efficiency. How are the hon. Gentleman’s comments consistent with the debates that we shall come to shortly?

Gregory Barker (Conservative, Bexhill and Battle)

I am speaking to new clause 12. I understand from you, Mr. Benton, that we may discuss new clause 12, and that it may be voted on a little later, depending on whether it is pressed. I hope that that clarifies the point for the hon. Lady.

I think that I have made my case. I simply feel that, for the Bill to be effective, the progress that it induces should be monitored, together with the Treasury’s success or lack of it in making advances to reduce climate change. The Treasury says that it already monitors those issues in the Red Book, but I have looked at the Red Book—I have copies of it here—and at no point does it replicate the specific accountability that my new clause addresses. There are areas where it comes close, but at no point does the Red Book in 2005, 2004 or 2003 address the key points in the new clause.

Malcolm Wicks (Labour, Croydon North)

As we have heard, clause 3 requires the Chancellor to publish a fiscal and economic strategy for microgeneration and energy efficiency. Earlier, I put the case for not accepting that the Prime Minister should have a responsibility, and now I have a similar duty to suggest that the Chancellor of the Exchequer and the Treasury should not appear in the Bill. I realise that this could be seen as a political risk—at one stage I delete the Prime Minister and at the next the Chancellor of the Exchequer—but I think that both my colleagues will fully understand and support my motives.

The amendments and new clauses are good debating pegs on which to hang a number of arguments about the virtues or sins of government. With respect, I do not think that they are serious issues in terms of the machinery of government. As my hon. Friend the Member for Lewisham, Deptford pointed out, the Treasury is involved at ministerial and official level in the interdepartmental work on the climate change review. One of the team members in the new energy review, which I am leading, is seconded in from the Treasury, and we have good relations at ministerial level. As my hon. Friend said, the Chancellor has asked Nick Stern to conduct a report with global as well as national significance on the economics of climate change. To suggest that the Treasury is not fully involved is a useful debating point, but it bears no relation to the truth.

Gregory Barker (Conservative, Bexhill and Battle)

The point is not simply that the Treasury is not involved. Surely the point is that it is not fully accountable. The key is the Treasury’s accountability and our ability to monitor the progress or lack of progress of the various initiatives.

Malcolm Wicks (Labour, Croydon North)

All Ministers are accountable to Parliament, and there are a number of different ways in which those matters can be tested.

Andrew Smith (Labour, Oxford East)

Does my hon. Friend agree that every economic statement and Budget report since the Government have been in office has contained extensive reporting on progress against environmental objectives—indeed, much more extensive than from any previous Government?

Malcolm Wicks (Labour, Croydon North)

Quite. Such reporting is a new and important feature of the pre-Budget report and so on. As the former Chief Secretary to the Treasury suggests, those of us who are interested can compare and contrast it with what was done by previous Administrations. Indeed, we may want to do that and to report on it in our next sitting, if the Chair allows us to do so.

The Government have already announced through the normal Budget process several fiscal and economic measures to support microgeneration and energy efficiency. To create an incentive at the point of purchase, the Government have reduced the rate of VAT from 17.5 per cent. to 5 per cent. on a variety of microgeneration technologies. I do not wish to be partisan, but I think that there might be a difference there with a previous Administration.

In April 2000, the Government introduced a reduced rate of VAT for solar panels, wind turbines and water turbines. The 2004 Budget announced a reduced rate of VAT for ground source heat pumps. The 2005 Budget extended that provision to cover air source heat pumps and micro combined heat and power, often known as micro-CHP. The pre-Budget report 2005 extended the provision further, to cover wood-fuelled boilers.

Gregory Barker (Conservative, Bexhill and Battle)

The point that we are trying to make is that the Red Book does not report on the very measures that the Minister has just listed. It does not report on CO2 emissions and the VAT reduction given on ground source heat pumps in 2004 or on the 2003 Red Book. It does not report on the CO2 reductions resulting from the VAT reductions on the energy saving measures introduced in 2000. I applaud the Treasury for introducing those measures, limited though they were, but we want to know whether they are effective and the Treasury to answer for them. They are not in the Red Book, and at the moment there is not a specific mechanism with which we can get that information.

Malcolm Wicks (Labour, Croydon North)

It is important that the Government should answer for them. There a number of ways in which we are doing that and reviewing the issue, not least with the climate change review.

The Government have also introduced several measures as part of a wider programme to promote energy efficiency across all sectors of the economy, including reduced VAT rates for the professional installation of energy saving materials and the landlords’ energy saving allowance for the installation of insulation in the private rented sector. Additionally, the Government support the Energy Saving Trust and the Carbon Trust with £100 million a year in their aim of encouraging the uptake of energy efficiency measures in the domestic and business sectors. The pre-Budget Report announced a number of further measures that will help us to meet our climate change goals, including revolving funds to assist small and medium-sized enterprises and the public sector to install energy efficiency measures. To have a requirement for a separate report on fiscal measures promoting microgeneration and energy efficiency would prejudice the normal Budget process. I therefore oppose clause 3 standing part of the Bill.

Gregory Barker (Conservative, Bexhill and Battle)

I promise that this will be my last intervention. How would that prejudice the Budget process?

Malcolm Wicks (Labour, Croydon North)

I do not think that it helps if Parliament puts on the statute book a range of specific requirements on the Chancellor and the Treasury which relate to a host of public policy objectives. It is the job of the Chancellor and the Treasury to review holistically economic performance and budgetary measures. We should focus on the substance of the challenge of climate change and the specific measures that we need to put in place. That is the purpose of the Bill. Dancing on the heads of political pins about the role of the Prime Minister and the Chancellor is good debating society territory, but, with all due respect, I do not judge it to be serious politics.

New clause 1 would require the Chancellor to publish his considerations on fiscal and economic measures to assist microgeneration. This new clause is similar to the existing clause 3, which we propose to remove. Again, there is a risk of prejudicing the normal budgetary process by treating microgeneration and energy efficiency differently from all other policy areas.

New clause 12 would require the Chancellor to report on the impact on CO2 of fiscal and economic measures to promote energy efficiency and microgeneration. I have explained the Government’s fiscal and economic measures to support microgeneration. As part of the normal Budget process, the Government report on the environmental impact of Budget and pre-Budget Report measures, as evidenced, for example, in table 7.2 of last year’s pre-Budget report. In light of that, we believe the new clause unnecessary.

I support amendment No. 16, which, in light of the amendment just discussed, removes the Chancellor of the Exchequer from the list of relevant bodies to which the Bill applies. I understand that my hon. Friend the Member for Edinburgh, North and Leith has spoken about the Bill to the Financial Secretary, and although the Treasury cannot offer any legislative compromise, it is happy to have further discussions with him.

Clause 2 - Annual report on greenhouse gas emissions

Clause 4 - National targets for microgeneration

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss the following: clause 6 stand part.

Amendment No. 29, in clause 11, page 6, leave out lines 15 to 17.

New clause 5—National targets for microgeneration—

‘(1)The Secretary of State must, during the period beginning with 1st November 2008 and ending with 31st March 2009—

(a)designate one or more national microgeneration targets, and

(b)publish a statement of that fact together with a copy of the target or targets.

(2)But subsection (1) does not apply unless on 1st November 2008 the Secretary of State considers that it would be appropriate to designate one or more targets under that subsection.

(3)For the purposes of this section, a national microgeneration target is a target in respect of—

(a)the number of microgeneration systems installed in England and Wales, and

(b)the number of electricity microgenerating systems installed in Scotland,

as at a date specified in the target (“the target date”).

(4)The matters to which the Secretary of State must have regard in determining whether subsection (1) applies include, in particular—

(a)the number of microgeneration systems installed in England and Wales,

(b)the number of electricity microgenerating systems installed in Scotland,

(c)the strategy published under section 82 of the Energy Act 2004 (c.20) (microgeneration), and

(d)the results of any research carried out into the effect that designating a target under subsection (1) could be expected to have on the number of microgeneration systems that are installed in England and Wales, and the number of electricity microgenerating systems that are installed in Scotland, by the target date.

(5)If a target is designated under subsection (1), the Secretary of State must take reasonable steps to secure that the target is met.

(6)At any time before the target date, the Secretary of State may review the target and, if he considers it appropriate to do so, revise the target.

(7)If under subsection (6) the Secretary of State revises a target—

(a)he must publish a statement of that fact together with a copy of the revised target, and

(b)the revised target is treated for the purposes of subsection (5) and section (National microgeneration targets: modification of section 1 of the Sustainable Energy Act 2003) as the target designated under subsection (1).

(8)In this section—

“electricity microgenerating system” means a microgeneration system for generating electricity;

“microgeneration system” means any plant or system of plant for generating electricity or producing heat—

(j)which, in generating electricity or (as the case may be) producing heat, relies wholly or mainly on a source of energy or a technology mentioned in subsection (7) of section 82 of the Energy Act 2004 (c.20), and

(k)whose capacity to generate electricity or (as the case may be) to produce heat does not exceed the capacity mentioned in subsection (8) of that section;

“plant” includes any equipment, apparatus or appliance.’.

And the following amendment thereto: (a), at end insert—

‘(5A)If the Secretary of State does not designate a target under subsection (1) he shall publish forthwith a statement of his reasons.’.

New clause 6—National microgeneration targets: modification of section 1 of the Sustainable Energy Act 2003—

(2)Section 1 of the Sustainable Energy Act 2003 (c.30) applies in relation to every relevant sustainable energy report as if after subsection (1B) there were inserted—

“(1BA)The report must also include such information as the Secretary of State considers appropriate about things done during the reporting period for the purpose of meeting any target designated under section (National targets for microgeneration) of the Climate Change and Sustainable Energy Act 2005 (national targets for microgeneration).”,

and as if, in subsection (1C), for “subsection (1A)” there were substituted “subsections (1A) and (1BA)”.

(3)For the purposes of this section—

(a)a sustainable energy report is a relevant sustainable energy report in relation to a target designated under subsection (1) of section (National targets for microgeneration) if the reporting period to which the report relates includes the period, or any part of the period, to which the target relates,

(b)a target designated under subsection (1) of that section relates to the period beginning when it is designated and ending with the target date (within the meaning of that section),

(c)“reporting period”, in relation to a sustainable energy report, has the meaning given by section 1 of the Sustainable Energy Act 2003 (c.30), and

(d)“sustainable energy report” means a sustainable energy report which is required to be published under that section.’.

New clause 7—Reports under section 1 of the Sustainable Energy Act 2003: microgeneration—

(a)omit “and” at the end of paragraph (b), and

(b)at the end of paragraph (c) insert “; and

(d)things done during that period for the purpose of implementing the strategy for the promotion of microgeneration in Great Britain published under section 82 of the Energy Act 2004.”.’.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

The new clauses are an alternative to clause 4, and amendment No. 29 is a consequential amendment, dependent on the replacement of clause 4. The clause requires the Secretary of State to establish national targets for the take-up of microgeneration through CO2 reduction or the installation of a number of microgeneration units. I want to replace this clause and clause 6 with alternative provisions that are designed to have the same effect.

I invite the Committee to remove clause 4 and replace it with new clauses 5 and 6 and amendment No. 29. The Government and Department of Trade and Industry officials have put it to me that one problem with the clause is that at this stage it is difficult to say what the targets should be, because the potential for technology is still being assessed and improved. I accept their argument, as it is valid. If a specific requirement to set a target with a specific figure were put in place, the question, “What should that figure be?”, could very well be put. It would be difficult to provide a specific answer, and we might end up setting unrealistic targets. They might be too low or too high, and we might not achieve the objective of providing a clear policy direction, which is the whole purpose of national targets.

What led me to propose national targets was the persuasive argument that moving towards targets is important, because it provides the market with the necessary certainty to persuade investors to invest the hundreds of millions of pounds that is needed to enable the mass production of microgeneration devices. One should expect that to lead to a price reduction for consumers of such devices, and, in due course, a virtuous circle in which price reductions lead to increased demand, leading to further investment, further price reductions and the further installation of microgeneration devices.

The advice that I have received is that in the case of many microgeneration devices, once the stage of mass production is reached, the length of time that a consumer has to wait before they start to see a pay-back from their investment can reduce from five, 10 or even 20 years, as it is at the moment, to three, five or seven years, which obviously changes the whole dynamic of encouraging consumers to invest in microgeneration. We must therefore work towards a situation in which we can set the framework to allow the targets to be introduced once we are clear what those targets should be.

I acknowledge the assistance of the Department of Trade and Industry, as well as of industry, various outside organisations and NGOs involved in discussions about these targets, in drafting the new clauses. Under new clause 5, the Government would be given a requirement to designate national microgeneration targets between 1 November 2008 and 31 March 2009. Under that requirement, the Secretary of State would also be allowed to take into account whether it would be appropriate to designate targets at that point. The factors that he would have to take into account in deciding whether to set targets are set out in new clause 5.

Theresa Villiers (Conservative, Chipping Barnet)

Is there any scope under the new clause for taking into account the different types of microgeneration technology within the target-setting process? There have been obvious problems with the renewables obligation, in that it has tended to focus on the cheaper more advanced technologies, and has not worked as well in the more expensive less advanced technologies. Is any gradation built into the new clause and, indeed, the Bill to ensure the development of all the different types of microgeneration technology?

Mark Lazarowicz (Labour, Edinburgh North and Leith)

As I am sure the hon. Lady would expect, there has been considerable discussion about the specific factors that the Secretary of State will have to take into account when setting a target. My understanding is that although there would be no specific requirement to consider the pros and cons of different types of technology—I shall rephrase that; there is no specific target in the Bill—matters to which the Secretary of State would have to refer would include the microgeneration strategy, which is to be published under the requirements of the Energy Act 2004, and the results of any research carried out into the effect of designating a target.

In my view, there is an implication that such a consideration would have to be taken, but the Minister may want to explain how the Government believe the provision will operate. In any event, my Bill sets out a provision for targets to be set, but lists several triggers that would mean that targets would not have to be set in certain circumstances. It is a positive encouragement, or endorsement, in the direction of setting targets.

Several specific factors are to be taken into account, including the number of installations by the target-setting date, the sort of microgeneration that I have indicated, and research into the effects of designating a target.

Joan Ruddock (Labour, Lewisham, Deptford)

Perhaps my hon. Friend can take inspiration from the London plan, which proposes that there should be 40,000 renewable energy schemes in London by 2010 and that all major developments should generate 10 per cent. of their energy needs from renewable sources. He will see from that that a direction has been proposed. Indeed, a whole range of microgeneration techniques has been proposed that could be put in place with the right support.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

My hon. Friend makes a very valid point. I am sure she will understand that I do not usually follow local government matters in London in great detail, but as it happens I was at a meeting of the London Assembly yesterday, and was made very much aware of the potential for microgeneration in London and of examples that could be taken up elsewhere in England, Wales and Scotland.

The requirement that the Secretary of State should have regard to research into the effects of designating a target is important because he would have to take account of the future effects of setting such a target. He would have to consider how many microgeneration systems had been installed in the past and take into account the strategy risks; in my view—although the Minister may gloss the wording differently—that would require the Secretary of State to consider the future effect of designating any target.

Nick Hurd (Conservative, Ruislip - Northwood)

Can the hon. Gentleman help me to understand better how the new clause moves us on from the current status quo? As I understand it, it will require the Secretary of State of the day to designate a target, unless he or she considers that inappropriate. I am concerned that that is not a very strong signal.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

Obviously, the Secretary of State or his representative today will have to explain how the Government envisage the provision working, but in my view it represents a considerable advance. I have discussed with the Government what would be an appropriate final form for the Bill, and I am convinced by what they have said about the provision representing a considerable step forward.

Hon. Members should bear in mind that before Second Reading the Government were, bluntly, against targets of any sort. My hon. Friend the Minister has shown a willingness to consider the matter in the course of discussions. We are now in a position in which the Secretary of State would be specifically required to designate one or more national microgeneration targets. Yes, there are circumstances in which the Secretary of State would not be required to designate them, if he did not consider it appropriate to do so, but he is given a specific list of matters to which he would have to have regard in determining whether targets were appropriate. Of course he is under an obligation under clause 1 to take into account the overall intentions of the Bill when making decisions under its provisions.

In my view, and that of the Bill’s supporters outside the House, the new clauses represent a considerable step forward, and I am happy to support them. Briefly, new clause 6 would effectively remove the reporting requirements set out in the existing clause 6 and replace them with reporting requirements under the Sustainable Energy Act 2003, which would be more consistent with the overall reporting requirements in relation to energy matters. I see no problem with that proposed change. For that reason I hope that at the appropriate time the Committee will vote against clause 4 and vote for new clauses 5 and 6. As I indicated, amendment No. 29 is consequential. I hope that the Committee will support the amendment tabled by the hon. Member for Bexhill and Battle which relates to reasons being given by the Secretary of State if a target is not designated.

Gregory Barker (Conservative, Bexhill and Battle)

Clause 4 requires the Secretary of State to establish national targets for the take-up of microgeneration, in terms either of CO2 reduction or the number of units of microgeneration installed. I understand exactly what the hon. Member for Edinburgh, North and Leith is saying. He wishes to remove the clause and replace it with new clauses because he believes that assessing what targets should be put in place is impossible at the moment, given that the potential for the technologies is still being assessed and improved.

I would point out that we are not talking about something that is far away. Indeed, some would argue forcefully that the technology is here, now; it is just not being implemented and taken up. I refer to the technology quarterly of The Economist, which says that

“The technology exists to enable a radical overhaul of the way in which energy is generated, distributed and consumed—an overhaul whose impact on the energy industry could match the internet’s impact on communications.”

That is the view of some experts on the present potential of microgeneration technology, so in considering the amendment, we must not think that we are a long way from being able to implement those aims.

I am a little concerned that we are kicking the matter into the long grass by default. If we accept that we cannot require a target in the Bill because we cannot state what that target might be, then we might be put in the impossible position of having no answer to that question while at the same time demanding targets. Targets are crucial, as they will provide the market certainty needed to persuade investors to invest the initial tens of millions of pounds—I have seen one estimate of £30 million to £50 million—needed to kick-start mass production, which would then virtually halve the price and cut the payback period from between five and 10 years to between three and five years. That is what is needed to change microgeneration from a niche market product to a mass market product, which all consumers can consider and embrace.

The long-term signals that the target sends out to the private sector are essential. I am worried that those long-term signals might compromised by the hesitation implied in accepting the clause. The private sector will provide the lion’s share of investment and of research and development funding for all such products. That is as it should be, but that private sector funding relies on the Government setting a sufficiently stable framework and a sufficiently long-term horizon within which that long-term funding and bank lending can be made.

Although I am not entirely comfortable with the proposition that targets cannot be laid now, I am willing to accept it. However, I have therefore tabled a small amendment, which would require the Secretary of State to state his or her reasons if indeed a target is not set. That might sound a little pernickety, but that the thinking of the Secretary of State, and of the Department and its officials, is fully explored is important, as is the Secretary of State being held fully accountable for that decision on the Floor of the House of Commons.

As I said in my opening remarks, the technology is already arriving and we cannot afford any further delay. With that, I hope that the Committee will see fit to support my small amendment.

Andrew Stunell (Liberal Democrat, Hazel Grove)

One always looks with some scepticism at amendments such as these, particularly when they appear to weaken the Bill. I understand the logic of the case made by the hon. Member for Edinburgh, North and Leith. However, there is a significant safeguard in new clause 7, which sets out more clearly that the target setter has to explain why they have not set a target—they are under more than an obligation simply to think about that.

If target setting is simply left to the discretion of the Secretary of State, the Chancellor or another member of the Government, they may be moved in future by quite different considerations from those that are in our minds today. They might be concerned about the possible impact on the profits of companies operating in the private sector if they were forced to introduce a new technology, which might provide less opportunity to make money compared with the selling of a standard product. If one considers central heating boilers and microgeneration plants, there may well be a good deal of resistance from manufacturing associations to going down that route. The decision could be affected by issues relating to the extra cost that might be imposed on consumers should they have to purchase extra equipment, or by the thought that to overcome those barriers the Government might have to commit public funds in order to secure success. There could be grants for those who install such equipment, which would impose a burden on central Government that they were unwilling to pay, or some kind of support for the industry’s research programme, which again, the Government might be unwilling to pay for.

If I may reflect on my experience with the ODPM in relation to building regulations it is clear that when the House passes legislation that clearly sets out an intention, a Department is perfectly capable of saying, “That’s all right but we think there are some other factors that are more important.”

The present Minister, as he was quick to say after his appointment, may not be long for his post; Energy Ministers seldom are. To refer back to my text for the day, he said that the pace of efficiency improvements has been slower than needed. He is minded to move ahead quickly—we will give him the benefit of the doubt—but will future target setters set targets without a specific requirement to do so being embedded in legislation, or will they duck those decisions because of difficult local, tactical, political influences that come into play and muddy the waters?

We have to be careful about saying that no targets are required. If we accept the provisions that say no targets are required, we must adopt new clause 7 to ensure that there is some requirement on the target setter to explain publicly why that is the case. If new clause 7 is adopted, I can be more confident, or at least more willing to accept the removal of the wording from the Bill as drafted. The hon. Member for Edinburgh, North and Leith and the Minister have a duty to reassure the Committee that they will not use the changes to escape the implementation of the Bill as intended, which is necessary if the Government are to come anywhere near achieving their efficiency and conservation targets.

Malcolm Wicks (Labour, Croydon North)

I suspect that there is not a great deal between us on this point. We are working on a comprehensive strategy to remove the barriers, such as planning requirements, that prevent the development of a sustainable market for the technologies. The strategy will be published by the beginning of April. There are already two specific targets to which microgeneration installations contribute: a target to have 10 per cent. of our electricity provided by renewable energy sources by 2010 and a target to have 10 GW of combined heat and power capacity installed in the same time frame.

I recognise that there is a lot of support for a specific microgeneration target. Many responses to our consultation on the strategy suggested that such a target would have a beneficial impact on the growth of the industry. However, even if we were persuaded by the arguments for an additional target, it would be difficult to set a meaningful one given that the industry is in its very early stages. Indeed, I propose a new political philosophy: not every good policy idea needs its own target. Hon. Members may find that surprising coming from a new Labour Minister, but I put it forward for consideration.

I opposed the wording of the original clause 4 in my hon. Friend’s Bill because it placed a specific duty on the Secretary of State to set a target now—my hon. Friend was being very modest in not requiring either the Prime Minister or the Queen to set that target, but we have had that debate—regardless of the difficulties involved in setting targets for an industry that is in its infancy. However, I am content with his proposed amendment, which gives the Secretary of State a suitable period in which to assess the progress of the industry and undertake further research into the impact of any target that might affect the overall strategy or the growth of the industry. If by November 2008 the indications are that a target would have a beneficial impact on market penetration by microgenerators, we will be able to undertake further work to develop a suitable target or targets.

Hon. Members may have noticed that the clause draws a distinction between the scope of any such target in England and Wales and its scope in Scotland. That is because heat-generating technologies are a devolved matter. Not all the hot air is in England and Wales. When setting a target, we will have full discussions with the Scottish Executive, with the aim of agreeing a target for all microgeneration technologies across the UK, without prejudicing the Executive’s right to have a specific target for heat-generating technologies in Scotland. I think that the approach to targets proposed in my hon. Friend’s amendment is a sensible way forward.

I want to comment on the intervention by the hon. Member for Chipping Barnet (Mrs. Villiers)—clearly, coming from that constituency, she is a supporter of biomass. I think that she was suggesting in her useful contribution that we should have sub-targets for different technologies. It is the Government’s role to show an interest in and support R and D in some of the new and interesting technologies, such as biomass and tidal power. Indeed, we offer such support, because we need to find ways to pull through into the market the technologies that can survive there. That is a serious issue. However—I hope that I am not contradicting myself; I do not believe I am—it is not the Government’s job, and certainly not a Minister’s job, to pick out what will be the successful technologies in years to come. The hon. Lady was not necessarily putting that idea forward, but I do not believe that micro-targets would work. However, she made an important point about the different technologies that exist now.

The hon. Member for Bexhill and Battle, the Opposition spokesman, has tabled an amendment that gives the Secretary of State a duty to publish his reasons for not designating a target, should that be his decision in November 2008. I noted that the official spokesman for the Liberal Democrats supported a Conservative amendment—but it is not for us to judge which three Liberal Democrats might join the Conservative party this week. The support that he was offering his colleague may or may not have been a clue. We have looked at the amendment and there may be a range of reasons for rejecting it. However, when I was considering those reasons while turning over my compost heap on Sunday afternoon, I could see no merit in any of them. Indeed, I am content to support the amendment.

Andrew Stunell (Liberal Democrat, Hazel Grove)

Was that an indication that the Minister is thinking of joining the Conservative party?

Malcolm Wicks (Labour, Croydon North)

To be honest, I still think that that party needs some leadership, but I am not tempted.

Clause 6 would give the Secretary of State a duty to report on the implementation of our microgeneration strategy and on the achievement of any target that we may set. I made it clear on Second Reading that we would report on such issues as a matter of course, so I have no objection to recasting clause 6 into new clauses 6 and 7. I also support amendment No, 29, which is consequential on clause 4 not standing part of the Bill.

In summary, I do not support clauses 4 and 6. I do support amendment No. 29 and new clause 5, as amended by amendment (a), and new clauses 6 and 7. I am sure that that is perfectly clear to all of us.

Clause 7 - Sale of electricity produced by domestic microgeneration

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss amendment No. 28, in clause 11, page 6, leave out lines 8 to 10.

New clause 8——Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc.—

(1)Where the Secretary of State considers it appropriate to do so for the purpose of increasing the amount of the electricity consumed in Great Britain that is generated by microgeneration, he may make—

(a)relevant modifications of the conditions of a distribution licence or a supply licence held by a particular person;

(b)relevant modifications of the standard conditions of distribution licences or supply licences.

(2)For the purposes of subsection (1), “relevant modifications” means—

(a)in relation to a distribution licence, modifications—

(i)imposing conditions requiring the holder of such a licence to provide information to holders of supply licences about the connection to the distribution system, or use, of microgeneration plant, or

(ii)for the purposes of enabling or facilitating holders of supply licences to satisfy any conditions of such licences of a description mentioned in paragraph (b), and

(b)in relation to a supply licence, modifications imposing conditions requiring the holder of such a licence to offer to acquire electricity generated by microgeneration by the licenceholder’s customers;

and also includes incidental, consequential or transitional modifications.

(3)A modification under subsection (1)(a) of part of a standard condition of a distribution licence or supply licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989 (c.29).

(4)Where the Secretary of State makes modifications under subsection (1)(b) of the standard conditions of distribution licences or supply licences, the Gas and Electricity Markets Authority must make (as nearly as may be) the same modifications of those standard conditions for the purposes of their incorporation in distribution licences or, as the case may be, supply licences granted after that time.

(5)Conditions included in a distribution licence or supply licence by virtue of a power conferred by this section—

(a)need not relate to the activities authorised by the licence, and

(b)may do any of the things authorised in relation to licences of that kind by section 7(2) to (4) of the Electricity Act 1989 (c.29) (which applies to the Gas and Electricity Markets Authority’s power with respect to licence conditions under section 7(1)(a) of that Act).

(6)In this section and section (Exercise of powers under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc))—

“distribution licence” has the meaning given by section 6(1)(c) of the Electricity Act 1989 (c.29) (licences authorising supply, etc);

“microgeneration plant” means plant used, or intended for use, for generating electricity by microgeneration, where “plant” has the same meaning as it has in section 82 of the Energy Act 2004 (c.20) (microgeneration);

“supply licence” has the meaning given by section 6(1)(d) of the Electricity Act 1989 (c.29).

(7)In section 33(1) of the Utilities Act 2000 (c.27) (standard conditions of electricity licences)—

(a)omit “or” at the end of paragraph (a), and

(b)after paragraph (b) insert “or

(c)under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc) of the Climate Change and Sustainable Energy Act 2005 (sale of electricity generated by microgeneration: power to modify distribution and supply licences etc)”.’.

New clause 9——Exercise of powers under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc)—

(1)Before making any modification of a distribution licence or a supply licence under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc), the Secretary of State must consult—

(a)the holder of any licence being modified, and

(b)such other persons as he considers appropriate.

(2)The Secretary of State must publish every modification made by him under that section.

(3)The publication must be in such manner as the Secretary of State considers appropriate.

(4)Where the Gas and Electricity Markets Authority makes modifications of standard conditions under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc)(4), it must publish the modifications in such manner as it considers appropriate.

(5)The Secretary of State’s powers under section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc) are exercisable only during the period which—

(a)begins with the first anniversary, and

(b)ends with the third anniversary,

of the commencement of that section.

(6)Sections 3A to 3D of the Electricity Act 1989 (c.29) (principal objectives and general duties) apply to the carrying out of functions conferred on the Secretary of State, or on the Gas and Electricity Markets Authority, by section (Sale of electricity generated by microgeneration: power to modify distribution and supply licences etc) or this section as they apply in relation to the carrying out of functions conferred on him, or on it, by or under Part 1 of that Act.’.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I invite the Committee not to allow the existing clause 7 to stand part but to replace it with new clauses 8 and 9, and to agree to amendment No. 28, a consequential amendment that is also in my name.

The clause would require the Secretary of State to establish a scheme enabling electricity produced by domestic microgeneration to be sold. I have had many discussions with those advising me on the Bill about the clause and I understand that the Government have raised a number of questions about it, in some of which I can see some merit. Even where I cannot see any merit, I accept that the changes must be made if we are to produce a coherent measure.

I understand that the Government believe that the direct requirement in the clause would not be consistent with their approach to intervention in the energy market, which I recognise as the overall Government policy on the issue. In any event I accept that, as there are specific difficulties with the wording of the clause, it is appropriate for changes to be made.

I accept that there are a number of difficulties with the requirement in the clause that a supplier buy electricity at the market rate. First, it is difficult to account for the range of different ways in which consumers might choose to supply the market. Because this is a growing technology, in some areas it would be difficult to specify what the market was and what was the correct rate to apply. There have been discussions about the appropriate wording. It has been suggested that a “fair” rate would be better than a “market” rate, but that again leads to potential difficulties with definitions.

Michael Weir (Scottish National Party, Angus)

I appreciate what the hon. Gentleman is saying about the difficulty of setting a market rate. However, if I understand his modifications correctly, no rate will be set. Is there not a danger that if the matter is left to individual electricity companies, they will set a tariff for buying microcell electricity that is too low to make any difference to the supplier? By removing the clause and inserting the new clause, is the hon. Gentleman not reversing the problem back to the microgenerator?

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I do not believe that that would be the effect, but if the hon. Gentleman will bear with me, I shall try to come to that point in a minute. I also want to explain a difficulty with the requirement to buy back electricity at the market rate. Although it seems a good idea, there may be circumstances in which it would be uneconomic to make such a requirement of a supplier, because the extra arrangements would create a large extra cost for the electricity company.

In addition, as was suggested to me by at least one person who contacted me, who appeared to be well informed, there are already some circumstances in which energy companies buy electricity at prices above the market rate. The individual who spoke to me was concerned that if my Bill came into effect, it would make his own arrangements uneconomic, because his company would no longer be able to buy back electricity at a rate higher than the market rate. For all those reasons, I accepted that the current wording would have to be changed.

The Government put it to me that the onus should really shift to the power companies; they should come forward with proposals to ensure maximum take-up of the opportunity for domestic consumers to produce electricity for microgeneration. Some power companies do that anyway. I understand from my discussions with the Government that they are keen for suppliers to develop a scheme on a voluntary basis. My proposed changes would give the Secretary of State back-up powers to require a scheme to be set up if the industry does not come forward with a scheme voluntarily within a certain time frame. I hope that the Minister can say a little more about how he envisages the relationship between a voluntary scheme and the opportunity to impose a scheme in due course, if the Bill becomes law.

Philip Hollobone (Conservative, Kettering)

Would not the sale of electricity from microgeneration plants simply form part of the renewables obligations of electricity power companies, just as the power companies already buy power from wind turbines on a major scale? Should we not discourage the Government from over-complicating what should be a fairly straightforward system?

Mark Lazarowicz (Labour, Edinburgh North and Leith)

It is essential that the scheme is not over-complicated, but I accept that the reality is complicated. To take the point about the renewables obligation, which is to some extent covered by the next clause and the replacement clauses, if the renewables obligation certificate can be made available to the domestic consumer, it could provide additional resources that consumers could trade in the market to subsidise the their domestic microgeneration installation. However, in many cases the consumer will also require the ability to sell the electricity itself in the market to provide extra cash to justify the cost of installation, so we will need both the ability to sell the electricity, and the ability to make effective use of the renewables obligation certificate regime to bring together the financial advantages for microgeneration, so that the consumer can take advantage of them.

In any event, the purpose of the new clauses is to give the Secretary of State powers to develop a scheme that would make suppliers offer a tariff to their own customers to export electricity from microgeneration units. That aims to counter the perceived barrier to suppliers being willing to buy such electricity. It would be up to the Secretary of State to decide the exact details of how that scheme is put into effect. Given that this is a complex subject, I think that that is the correct way forward.

It is important to note that under new clause 9 the Secretary of State would be asked to decide whether to use his power within 12 months of the Bill receiving Royal Assent. That gives the industry a reasonable time to develop its own schemes, but does not put off until some vague date the time by which the question has to be addressed. It provides a time limit, both for industry and to concentrate the mind of the Department. With that explanation, I invite the Committee to agree to deleting the existing clause and to the substitution of the new clauses.

Gregory Barker (Conservative, Bexhill and Battle)

I concur with a great deal of what the hon. Gentleman says; he has put his case extremely well, and this is a very complex issue. This is an ambitious little clause, the subject of which ought to be the subject of a whole White Paper on the decentralisation of the entire British energy system. If we are going to bring that about, and have a microgeneration revolution, we will need more than this little clause. There are a vast number of issues that need to be addressed thoroughly if we are going to achieve the truly flexible two-way supply system that microgeneration holds out the possibility of achieving. At the heart of such a decentralising White Paper must be the proposition that ultimately, all electricity suppliers should be required to purchase surplus electricity from domestic power generators. If we do not have that, microgeneration will, effectively, always remain a niche offering.

I fully accept that simply compelling generators to purchase domestically generated electricity is a big matter: it requires the Government to intervene in the electricity market, which, under the previous Acts, they are not able to do, and it raises issues about market pricing and discounts. I should hesitate to push forward something so important that would have such profound economic consequences on the companies involved without thinking it through.

Philip Hollobone (Conservative, Kettering)

Is there not an obligation on power companies to supply residents in their area? Is that not a market intervention sanctioned by the Government’s Energy Act 2004?

Gregory Barker (Conservative, Bexhill and Battle)

That is probably so.

When we talk about the obligation to purchase renewable energy, we are talking about a fundamental difference between electricity companies buying commercially generated electricity from commercial operators, which have the infrastructure to supply electricity regularly at an agreed tariff at agreed times through a fully commercial infrastructure, and making those companies replace or complement that supply by purchasing at all times electricity that is generated on a much smaller scale, intermittent, of a different volume, and taken through a different network. It remains to be seen whether the existing distribution network at household level is capable, on a large scale, of taking such inputs.

This is a complex area, but we as a nation and as an electricity market need to get our head around it. However much I wish it were not the case, I fear that, by themselves, the clauses will not be sufficient to bring about the microgeneration revolution that is so desirable. The hon. Member for Edinburgh, North and Leith has planted a flag on the subject by raising it in his Bill, but I do not think that the provisions are sufficient to secure the progress that we want. However, I accept the amendments that he has proposed and support the thrust of the Bill.

Malcolm Wicks (Labour, Croydon North)

Again, I am grateful to my hon. Friend the Member for Edinburgh, North and Leith for tabling the amendments. He has indeed planted a flag. It is clear that being able to sell any excess electricity from microgeneration units is seen as one of the economic advantages of microgeneration and as a way to promote take-up. It is also clear—rightly or wrongly—that microgenerators believe that there are barriers to selling their unused electricity, in that very few suppliers offer a tariff for that exported electricity.

On Second Reading, I said that we could not support the original clause 7, which would impose a requirement on suppliers to buy electricity from microgenerators at the market rate. Supporting such a proposal would go against our commitment not to intervene in energy markets. The energy sector needs certainty if it is to invest to deliver our energy goals. By and large, it is doing that, from network and infrastructure investment through to renewable and conventional generation.

Philip Hollobone (Conservative, Kettering)

I am not entirely convinced. We are confusing the distribution of electricity with the supply of electricity. The physical distribution of electricity through wires happens automatically. Electricity supply is a non-physical product—it is a financial contract between an electricity supply company and a consumer. Electricity supply companies have to make thousands of decisions each day about residents buying electricity from them—they are obliged to do that in their franchise areas. In respect of the generation of domestic electricity, would it not be simple for the Government to make it an obligation on the part of the supply companies to purchase from domestic consumers in their franchise areas?

Malcolm Wicks (Labour, Croydon North)

Let me advance my argument further on that point. I was about to say that stability and certainty are a prerequisite for that development, which is why we are committed to delivering within a liberalised, competitive market framework.

The original clause 7 would have been an intervention in the market that would have made suppliers buy electricity from microgenerators at a certain price in a way that would not apply to any other form of generation. It would also push an unsustainable business model on to suppliers. Few businesses can sustain their viability by selling their product at the same price as they buy it. Microgeneration has been identified as a form of generation that can contribute to the Government’s White Paper goals. As such, it is up to us to look at how we can remove barriers, perceived or otherwise, that might be in the way of an increased take-up of microgeneration. Of course, microgeneration, which qualifies for renewable obligation certificates, will be a more attractive proposition for suppliers.

I can understand why suppliers, which are looking to buy large volumes of electricity and at a specified time, might wish to overlook the relatively small amounts of electricity exported from microgenerators. Not knowing when that exported electricity will be available does not make it more attractive. The purpose of the amendment is to give a clear steer to the market that we want it to play a full part in encouraging the growth of microgeneration. I am aware of at least one supply company that is now in partnership with a wind microgenerator. I am pleased that many suppliers are already developing their own programmes to demonstrate such action.

The new clauses would not set a specific tariff, but it is explicit that suppliers are expected to acquire the electricity. As the microgeneration sector develops, it is hoped that suppliers will use the tariff that they offer customers for exported electricity as a means of competing—as part of their overall energy packages. Amendment No. 28 is consequential on the removal of clause 7. It would remove the reference to “licensed electricity supplier” in the original clause 7.

New clause 8 would allow the delivery of any scheme through the licensing regime. Ministers would have powers to amend both supply and distribution licences to ensure that microgenerators can sell their electricity. Licences are enforced by Ofgem and businesses can be fined if they do not fulfil their licence obligations. It is preferred that the market develops its own initiatives to support microgeneration, and I am confident that we shall see an increase in momentum in the short term.

That is why the suggestion that Ministers make a decision 12 months after Royal Assent about whether to use the power is sensible. It shows that we trust suppliers to support microgeneration. It gives them time to develop, in an unprescriptive way, initiatives to help microgeneration. However, it also sends a strong message that the Government will help microgeneration by ensuring that suppliers offer a tariff for exported electricity should the relationship between microgeneration and suppliers not evolve as we hope and expect.

Gregory Barker (Conservative, Bexhill and Battle)

Will the Minister go a little further and explain the time scale in which he expects the relationship to grow? It is not something that we can leave be; we all want a rapid increase in take-up of the technology. What time scale does the Minister have in mind? If the progress he hopes for is not made in that time scale, what does he propose to do?

Malcolm Wicks (Labour, Croydon North)

We need to look at development in the short term. I am reluctant to specify a period of months or years today. If I can come back at our next sitting, having reflected on the matter, I shall do so. I hope that I have demonstrated that we take the matter seriously. We must be careful about any specific intervention, but we expect suppliers to take the matter seriously and listen to what hon. Members have said.

It is important to note that by asking Ministers to make a decision 12 months after Royal Assent, the amendment will allow the sector to develop with the certainty of knowing exactly when a decision will be made. The Government oppose clause 7 standing part of the Bill and support its replacement by new clauses 8 and 9. We also support amendment No. 28, which is consequential on the removal of clause 7.

Clause 8 - Microgeneration and access to green energy certificates

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss new clause 10—Functions of the Gas and Electricity Markets Authority in relation to microgeneration—

‘In section 47 of the Electricity Act 1989 (c. 29) (functions of the Gas and Electricity Markets Authority), after subsection (1) insert—

“(1A)The activities to which subsection (1) applies also include, in particular, activities connected with the generation of electricity by microgeneration or with the transmission and supply of electricity so generated.

(1B)In subsection (1A), “microgeneration” has the same meaning as it has in section 82 of the Energy Act 2004 (Secretary of State’s strategy for promotion of microgeneration)”.’.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

The clause and proposed new clause deal with microgeneration and access to green energy certificates. I invite the Committee to reject clause 8 and, in due course, add new clause 10 to the Bill.

As we have discussed, access to renewables obligation certificates is important if microgeneration is to become a viable technology for many consumers. The ability to access the certificate and cash in the financial value that it provides can be make or break for an individual who is deciding whether investing in microgeneration makes sense in their circumstances. That is why clause 8 was drafted as it is. It has been put to me, and I see the force of the argument, that the proposals in clause 8 have unpredictable implications in that the likely impact on various public authorities is unclear and might have undesirable consequences in relation to microgeneration and consumer interest.

To ensure that microgeneration and the interests of microgenerators are put at the centre of the regulator’s decision-making process and activities, which affect how consumers access renewables obligation certificates, the new clause would deliver a statutory link between Ofgem and microgeneration, which would require the regulator to demonstrate a specific regard for microgeneration. That would send a clear message to the authority about the importance of microgeneration without upsetting the whole scheme of regulation or the relationship between Government, Parliament and the regulator.

The Bill as drafted refers to several green energy certificates: levy exemption certificates, renewables obligation certificates and renewable electricity guarantee of origin certificates—LECs, ROCs and REGOs as they are known in the business. I understand that the Government will, in due course, introduce proposals that will make it easier for microgenerators to obtain ROCs and will examine the barriers in relation to REGOs and LECs under the microgeneration strategy. On the basis of those assurances, which I am sure that the Minister will say something about, I am happy to proceed in the way in which I have indicated. I invite the Committee to support new clause 10 in place of clause 8.

Gregory Barker (Conservative, Bexhill and Battle)

Once again, I agree with the hon. Gentleman. Clearly there are concerns that Ofgem may not be paying suitable attention to the needs of microgenerators, and the new clause would deliver a statutory link between Ofgem and microgeneration, demonstrating a requirement that the regulator must have some regard for microgeneration. It is worth noting that even back in 2004, the House of Lords Science and Technology Committee noted:

“The changes introduced by Ofgem may ease the burden on distributed generators,”—

that is, microgeneration—

“but fall far short of effecting any fundamental reorientation of a regulatory framework that penalises distributed generation. If the Government wish to encourage distributed renewable generation, they must therefore fundamentally review their strategy.”

Again, this is a small new clause that seeks to effect a huge revolution, and we really do need to address the problem of Ofgem and the straitjacket in which the electricity generators operate if we are to release the full potential of microgeneration. If we are to do that, energy regulation needs to be completely overhauled, and Ofgem could be transformed into a sustainable energy regulator with a primary duty to deliver substantial emissions reductions through the active encouragement of microgeneration. One cannot hope to achieve that through this relatively modest new clause, but I accept that that is the direction in which it is pointing. It is encouraging a lot more thought and work, and the Government need to make their input with a great deal more urgency if we are to make advances and get Ofgem fully engaged.

The new clause, by adding microgeneration to section 47 of the Electricity Act 1989, which gives Ofgem the powers to examine certain activities in the electricity sector, Parliament and parliamentarians are sending a clear message to the authority about the importance of microgeneration. I hope, however, that we will deal with the issue on a much larger scale in the future.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I was very disappointed by the new clause, because it removes some of the specifics from clause 8. In clause 8(2)(a), for example, Ofgem must have particular regard to electricity metering, which I have spent some time investigating over the years. I have tried numerous times to have that matter taken seriously, because it is the foundation on which to make embedded generation work for the generator.

I had a long-running discussion with Ofgem when the environmental side of its business was being brought to the fore through legislation in this House. Ofgem was repeatedly challenged to have regard to environmental affairs, but it said that we would have to wait until its legislative guidelines were changed. That went on for months and months.

The Energy Act 2004 was eventually passed, and the environmental requirement was imposed on Ofgem. When I approached it again about electricity metering, it said that the new duty would make no difference, because it had taken full regard of what Parliament intended to do any way. Indeed, the duty did make no difference—because Ofgem would not have regard to it before it was imposed, and after it was given the duty it claimed that it had already adjusted its policies to have regard to it.

I thought that it would be a real step forward to put slap bang in the middle of the Bill a requirement to deal with electricity metering. Now I see that the requirement is simply to have regard to microgeneration. I suspect that we will be told that Ofgem cannot do that until the Bill has achieved Royal Assent, and I very much suspect that when it has Royal Assent, Ofgem will say that it knew that Parliament was going to pass that provision and that it has always had regard for microgeneration, so the Bill will not make any difference.

I want to hear the promoter of the Bill and the Minister say that before the Bill gets through the House of Commons, there is a real intention to ensure that Ofgem does something about the duties that are imposed here—and that those will include dealing with metering, which is a fundamental part of making embedded generation work in this country.

Philip Hollobone (Conservative, Kettering)

I support new clause 10, tabled by the hon. Member for Edinburgh, North and Leith. It is vital that a clear signal be sent to Ofgem that Parliament, and the Government, mean business on microgeneration.

There are three different electricity industries, and it is important not to confuse them. They are transmission—the long-distance transport of electricity, mainly on the national grid—distribution, which is the local, physical transfer of electricity on smaller voltage cables, and the electricity supply industry, which is just a financial contract industry where the same companies are buying electricity from generators and selling it to you and me, Mr. Benton, or to commercial firms, as customers. We tend to talk about the electricity industry, but it is not one thing; there are three fundamentally different activities going on.

The clause sends a signal to Ofgem that it must effectively promote microgeneration. However, it could be so simple to tie up all the things together. Were you minded, Mr. Benton, to have a wind turbine in your home, it should be possible to include on your electricity bill a line that says “minus £200” instead of “plus £200”, because of the electricity that you had generated in your home. The electricity would have physically left your home and gone into the local distribution network, but there would be an automatic transfer in terms of the financial contract and the meter reading. The job of the Bill, of government and of the regulator, should be to make that process as simple as possible. Otherwise we will not get the widespread expansion of microgeneration that all hon. Members want to see.

Malcolm Wicks (Labour, Croydon North)

This has been a useful and interesting debate. I understand full well my hon. Friend’s desire to see a statutory link between microgeneration and the regulator, Ofgem and I welcome the amendment as a more considered proposal than that in previous drafts. Clause 8, as originally drafted, was not acceptable to the Government because it aimed to elevate microgeneration above other forms of generation, including renewables, in Ofgem’s hierarchy of decision making.

Regulatory certainty is essential if we are to deliver our energy goals. Less than two years ago, an amendment was proposed that would have altered Ofgem’s duties so that renewables were the main focus. We resisted that. Ofgem’s duties are less than five years old. Those duties were considered while working on “Our energy future—creating a low carbon economy”, the energy White Paper published in 2003, they were debated during the passage of the Energy Bill, and stakeholders know and understand them. Had we agreed the Energy Bill amendment, and now this proposal to add microgeneration to Ofgem’s duties, we would have created, by such chopping and changing, the exact uncertainty we wish to avoid.

Michael Weir (Scottish National Party, Angus)

I am interested in what the Minister is saying about Ofgem. He mentioned the rejection of the renewables duty, but is he convinced that Ofgem now takes sufficient account even of the Government’s strategy on renewables? My experience of Ofgem’s attitude to transmission charges, which we will no doubt talk about later, and of which the Minister is very much aware, is that it took no account whatever of renewables when making up its transmission regime, which—albeit that the Minister is proposing changes to it—currently works against renewables.

Malcolm Wicks (Labour, Croydon North)

Let us understand the governance issues. Ofgem, as a non-ministerial department, answers to Parliament, not to the DTI. It is right for hon. Members to raise concerns here, but Ofgem develops its own procedure. As has been said, the message about what Parliament wants the regulator to do will be loud and clear; it is already. It is important to understand that Ofgem is not a sub-unit of my, or any other, Department.

The original clause 8 specifically mentioned a number of green energy certificates: renewables obligation certificates, known as ROCs, levy exemption certificates—or LECs—and renewable electricity guarantee of energy certificates, known as something so ridiculous I am not going to spell it out. There is consensus that microgenerators should not be discriminated against. In the Bill, we aim to provide several measures that will make it easier for microgenerators to obtain renewables obligation certificates. We will table amendments to that effect in time for the Committee’s next sitting. However, we do not think that microgenerators encounter the same barriers when obtaining levy exemption certificates and—I will say it—REGOs, or renewable energy guarantees of origin, as they do when obtaining ROCs.

For example, a significant administrative barrier preventing microgenerators from obtaining ROCs is the need for a sell-and-buy-back agreement. That is not required for either of the other two mechanisms. That is an issue that we are addressing in the Bill. Other barriers that exist are better addressed outside the Bill, and will be considered in the forthcoming Government strategy on the promotion of microgeneration.

Ofgem’s principal objective is clear and gives it clarity of purpose for its decision-making process. The principal objective is

“to protect the interests of consumers wherever appropriate by promoting effective competition.”

We must always remember that the statute describes future consumers as well as existing ones, and that means that Ofgem should not make decisions that discriminate against microgeneration. That, however, is different from being required to promote microgeneration.

Ofgem’s secondary duties ask it to have regard both to the environment and to the achievement of sustainable development. There is also the Secretary of State’s social and environmental guidance, which allows Ofgem to contribute to broader Government policies without going against the principle of arm’s-length regulation. The Sustainable Energy Act 2003 made it a statutory requirement for Ofgem to produce regulatory impact assessments for all important decisions, and those RIAs have to include an environmental impact assessment.

It is already in Ofgem’s remit to consider microgeneration. Given its recent consultation on how the regulatory framework might need to be adapted for microgeneration, it is clear that the issue is on its radar. The Government’s work on microgeneration, and this Bill, mean that Ofgem cannot fail to take notice of the momentum behind microgeneration.

It should also be noted that none of Ofgem’s duties specify a form of generation. We ask Ofgem to protect the consumer; that is clear. To ask it to protect the consumer and at the same time to promote microgeneration might be anything but clear. However, the new clause shows Ofgem that Parliament believes that there is a place in statute for the regulator to consider microgeneration. Section 47 of the Electricity Act 1989 already gives Ofgem powers to look into certain activities in the electricity sector. By adding microgeneration to those activities, Parliament is sending a clear message to the authority that we take seriously the contribution that microgeneration can make, and that we fully expect Ofgem to do so as well.

Theresa Villiers (Conservative, Chipping Barnet)

Both the Minister and the hon. Member for Edinburgh, North and Leith, who is the promoter of the Bill, have emphasised that the Bill will make it easier for those installing microgeneration mechanisms in their homes to get access to renewables obligation certificates. Will the Minister outline the procedure that someone who has just stuck a wind turbine on their roof will have to go through to get one of those certificates?

Malcolm Wicks (Labour, Croydon North)

Of course I could, and in some detail—but I am reluctant to hold up the Committee. Seriously, if I am allowed, I could write to the hon. Lady about that, and if necessary, I will copy the letter to the Committee. It is still fairly early days on that point, but I will consider the matter.

The hon. Member for Kettering (Mr. Hollobone) made a useful contribution. I think that he was venturing into the territory of smart meters. Although that is not the subject of the Bill, and I am not equipped to say much about it, that issue—which is not without its difficulties in terms of investment—is, to use the phrase again, very much on our radar screen, and is important.

In summary, we oppose clause 8 standing part of the Bill, but we support new clause 10.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

The hon. Member for Hazel Grove (Andrew Stunell) invited the Minister and me to explain how the changes would achieve the objectives set out in the Bill as originally drafted. The hon. Gentleman, I am sure for good reasons, is no longer here, but for the record, to follow up the Minister’s comments on the changes to the certificate regime, I shall say that it will be a considerable improvement for the consumer if they are brought forward. That is why I was willing to accept the suggested changes. To be frank, I recognise that the area is so complex that however carefully I draft amendments, and even if they had been accepted against the will of the Government, I could not have achieved much without the help of the Department. I recognise that the Government must do that. As a Back Bencher, it is difficult to put together the full framework that is required.

I agree with what Conservative Members and the Scottish National party Member said about the need to make the process of going for green energy—renewable energy—much simpler. Given the way in which Ofgem operates and how it tries to achieve that objective, I am sure that many of us know from personal experience of trying to adjust our energy consumption patterns to take account of such concerns how extremely difficult it often is for customers to do that. I hope that Ofgem receives a clear message from Parliament today that customers and consumers need the process of acquiring the ability to take advantage of the new forms of energy to be made simpler. I hope that it will listen to what the Government are saying, too.

Clause 9 - Promotion of community energy

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I beg to move amendment No. 22, in clause 9, page 4, line 36, at end insert ‘projects’.

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss the following amendments: No. 23, in clause 9, page 4, line 38, leave out paragraph (a).

No. 24, in clause 9, page 4, line 39, at end insert—

‘()schemes whose purpose or effect is the promotion of community energy projects,’.

No. 25, in clause 9, page 4, line 40, leave out ‘community energy,’ and insert

‘such schemes and community energy projects, and’.

No. 26, in clause 9, page 4, line 41, leave out from ‘of’ to end of line 44 and insert

‘advice and assistance (whether by public authorities or any other persons) to persons establishing and operating, or proposing to establish and operate, community energy projects’.

No. 32, in clause 9, page 5, line 2, leave out from beginning to end of line 18 and insert—

‘ “community energy project” means—

(a)the use of relevant plant for a community purpose,

(b)the installation of relevant plant for use for a community purpose, or

(c)the adaptation of any plant for use as relevant plant for a community purpose;

“community purpose” means the purpose of—

(d)generating electricity for consumption wholly or mainly in qualifying premises, or

(e)producing heat for use wholly or mainly for heating qualifying premises;

“plant” includes any equipment, apparatus or appliance;

“premises” means any building or buildings (and for this purpose “building” includes part of a building);

“qualifying premises” means premises which—

(f)are used wholly or mainly for purposes other than carrying on a trade, business or profession, and

(g)in the case of premises which consist wholly or mainly of a dwelling or dwellings, contain at least five dwellings;

“relevant plant” means any plant which—

(h)in generating electricity or (as the case may be) producing heat, relies wholly or mainly on a source of energy or a technology mentioned in section 82(7) of the Energy Act 2004 (c. 20) (microgeneration), and

(i)satisfies the condition in subsection (4).’.

No. 27, in clause 9, page 5, line 18, at end insert—

‘(4)Plant satisfies the condition in this subsection if its capacity does not exceed—

(a)in the case of plant for the generation of electricity, 20 megawatts, and

(b)in the case of plant for the production of heat, 100 megawatts thermal.’.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

The amendments are designed to clarify the provisions for community energy under the Bill. I am delighted that the Government have no objections to clause 9 as it stands, so I shall be inviting members of the Committee to support it at the appropriate time. I am grateful to the Department of Trade and Industry for working with me to draft the amendments, which will strengthen the provisions.

Some amendments are essentially drafting proposals, but I draw particular attention to amendment No. 26. It would make clear that support for a community energy project can include advice and assistance

“to persons establishing and operating, or proposing to establish and operate, community energy projects”.

In other words, support is not necessarily only for the physical infrastructure, but the development of the schemes.

Amendment No. 32 would make it clear that qualifying premises that would benefit from the community energy projects can include premises that

“are used wholly or mainly for purposes other than carrying on a trade, business or profession”

and

“in the case of premises which consist wholly or mainly of a dwelling or dwellings, contain at least five dwellings”.

The provision would allow support for community energy projects, and not only for buildings such as community halls. It would include dwellings and flats, as long as there were a minimum of five dwellings involved, constituting a genuine community of some sort. It could be a community of five dwellings or a much larger one—an entire village or block of flats, or half a town or city—subject, of course, to its being of such a size that it could be regarded as a community.

In that respect, I draw the attention of the Committee to amendment No. 27, which specifies the maximum size of the plant covered by the provision. The upper limit for an electricity generating plant would be 20 MW, and that for a heat generating plant would be 100 MW. Those limits were suggested to me by the Department on the basis that they are twice the size of the largest existing district scheme supported by DEFRA. The view is that the maximums would not impose undue restrictions of size on the development of community energy projects, and would prevent them from being so large that they covered an entire city, or the entire country.

Gregory Barker (Conservative, Bexhill and Battle)

Clause 9 requires the Secretary of State to promote community energy schemes, and lists the ways in which that could happen. That would set up a cost-effective, flexible way of assisting the set-up or establishment of such schemes. The amendments tabled by the hon. Member for Edinburgh, North and Leith all make a great deal of sense. However, before we skate on in our haste to get through the Bill, I do not want to do without a short discussion of the potential of community energy generation.

We rightly spent a fair amount of time this afternoon extolling the virtues of microgeneration, and talking about our hopes and aspirations for a revolution in that sphere. However, we must equally talk about the fact that in many circumstances microgeneration is not appropriate, or would be difficult to make available. Alternatively, in some cases community energy may be a better option. Heat sources can include conventional boilers using conventional fuels, but, in our war on carbon emissions, we must hope that the phenomenon could trigger a move towards biomass and domestic or agricultural wastes, and, importantly, combined heat and power plants, in which the heat generated by electricity production is captured and used to generate more electricity, or is distributed around the community via a heat network.

I understand that there are now about 1,300 sites in the UK that utilise CHP and that they generate about 6 per cent. of our electricity. It is not just an energy source of the future; it is happening now, and we should be doing what we can to encourage it. Probably the greatest exemplar of its potential, and of what is happening, is Conservative-controlled Woking. Woking borough council has done some extraordinary things. I have not been to Woking yet, but I hope to visit it in the near future. My eyes were opened to what has happened there only by a terrific presentation given to me recently by Greenpeace. They extolled the work, in particular, of Allan Jones, the former energy services manager of Woking borough council.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

In the spirit of consensus, which is all the rage nowadays, I am sure that the hon. Gentleman would accept my assurance that I recognise what Woking has done, and also recognise that the gentlemen to whom he referred has been recruited by the Mayor of London to take forward proposals for the London climate change scheme. I hope that he recognises the important work that is being done in London, as well as what has been done in the past in Woking.

Gregory Barker (Conservative, Bexhill and Battle)

Absolutely. I welcome the Mayor’s agenda, which is very exciting and will command a lot of support. However, I am trying to make the point that this is not just for the future—it has already happened. The doubting Thomases need not worry; they can go to Woking. It is still very early days for London, but Woking borough council has already pioneered a network of more than 60 local generators, including co-generation and tri-generation plants, photovoltaic rays and a hydrogen fuel cell station to power, heat and cool municipal buildings and social housing. Many town centre businesses are also connected to that local energy supply.

The Woking energy model has already produced dramatic savings in energy use and reductions in greenhouse gas emissions. With further help from energy efficiency measures, the council has reduced the CO2 emissions associated with the operations of its own estate, including social housing, by a staggering 77 per cent. That is a huge lesson for the Government. I hope that the Minister will join me in going to Woking; the Government estate is woefully behind municipal government on this issue.

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman need not even go as far as Woking; he could go to Lewisham, in my constituency. The borough council has a superb low-carbon energy programme and renewable energy for its buildings and several schools. A housing association in Lewisham is about to install 14 mini-turbines.

Gregory Barker (Conservative, Bexhill and Battle)

I am delighted to hear that, and may well take up the hon. Lady’s offer.

Alan Whitehead (Labour, Southampton, Test)

If the hon. Gentleman is considering doing a circular tour, he could start in Woking, then go down to Southampton to see the geothermal energy plant that has been working for a number of years. It also undertakes CHP and heats municipal buildings, supermarkets, the college of higher education and the university. A new heating development will use renewable bio-oil facilities and heat 3,000 homes to the west of the city. Having seen all that, the hon. Gentleman could then go to Lewisham and then back home.

Gregory Barker (Conservative, Bexhill and Battle)

What an exciting day that promises to be.

Although the Woking, Lewisham or Southampton models—particularly the Woking model—are widely celebrated in energy circles, their significance for UK energy policy has yet to be fully appreciated. All the examples that we have heard about show that here and now renewable technologies and co-generation are highly complementary and lend themselves flexibly to an engineering approach as finances allow.

The key lesson—whether in Woking, Lewisham or Southampton—must be that, liberated from the constraints of centralised rules and infrastructure, co-generation and renewables can assert their own competitive potential and work in a competitive marketplace. I really hope that in our enthusiasm for microgeneration we have not diminished the importance and potential of community energy.

I have one niggle, about which I have tabled a further amendment. The Government have been far-sighted and generous to me today, and I am sincerely grateful to the Minister for agreeing to my previous amendment. However, I hope that he will consider something else. I am not calling on the Prime Minister, the Chancellor, the Archbishop of Canterbury or any member of the Royal family, but only the Secretary of State to lay before Parliament each year a report on steps that the Government have taken to promote community energy.

We have already established that principle, and it is important that, in order to maintain the focus and attention of the House of Commons, and through it, the greater world outside, we allow Parliament the opportunity to quiz and hold accountable Ministers of this and any future Government, because this programme is long-term. I have no doubt that we will need to hold Ministers to account for many years to come before we can be truly satisfied that we have reached the full potential of community energy.

Mark Lazarowicz (Labour, Edinburgh North and Leith)

I was tempted to intervene on the hon. Gentleman when he started to discuss in detail the virtues of Woking, but then my hon. Friends the Members for Southampton, Test, and for Lewisham, Deptford, referred to their constituencies, too. Just to complete things, I add that interesting things are going on in Edinburgh, too, but I shall not now invite hon. Members to visit—of course, they are welcome to do so—because the clause does not apply to Scotland.

At the beginning of the sitting, in speaking about a possible interest of mine in relation to the promotion of schemes, I referred to my involvement in the development of a community energy scheme in my area. Once one becomes involved, one finds that an incredible range of organisations want to take up exciting ideas about decisions on energy use, energy saving and energy efficiency locally.

The clause has incredible potential, and I am delighted that the Government will accept it, as I understand it. Although they have in the past promoted community energy in various ways, I think that this is the first time that a specific duty to promote community energy in a wider sense will be incorporated in legislation, although there were certain specific provisions before. The direction that we are taking has potential for application in many ways. As we suggested, it can provide heat and/or power for one building, multiple buildings or entire communities, and it can apply to homes, schools, universities, hospitals, leisure centres and offices. Initiatives can be run in a range of ways involving the community, co-operatives, mutuals and various other organisations. The clause has real potential, and I think that it will resonate in many parts of the country.

Although the clause will not apply to Scotland—I will not say that I regret that, because as a strong supporter of devolution I am always keen to ensure that matters are devolved where they can be—I certainly hope that the approach will be taken up in those parts of the UK to which it does not apply as a result of the devolution settlement.

Nia Griffith (Labour, Llanelli)

I very much welcome this aspect of the Bill, as it is extremely important that we promote community energy. We have heard about many laudable projects that have already been put into action, but I ask my hon. Friends and Opposition Members to join me in investigating and promoting the opportunity to connect the training machines in the Palace of Westminster gym to a power generation system. That would enable all hon. Members, including Ministers, to show their commitment to producing energy and using it in the House. It is a rather ambitious project, and plans are on the table at the moment, but I see that as another community energy project. We could use that human energy, which is being used to get rid of excess fat and make people healthy, to produce light for use here in Westminster.

Malcolm Wicks (Labour, Croydon North)

I am reflecting on that informal amendment. I suppose that the logic would be that when were all voting and not in the gym, the lights would go out. We need to think through the technicalities.

We live in interesting times. The Conservative party spokesman, the hon. Member for Bexhill and Battle, used the word “revolution” about three times. I understand that the Conservative party is seeking to move to the left, but I recommend that it goes through a Fabian gradualist stage first. Then we hear that one of those revolutions has taken place in Woking; that is about as unlikely as a whale in the Thames and Wigan beating Arsenal, but we live in strange times. Seriously, I, too, have heard about developments in Woking. We could go on the long march to Woking together, but if we took in the constituency of every Committee member who wanted to namecheck their locality, it would indeed be a long march, perhaps longer than the original one.

We are committed to community energy schemes, and not only because they reduce emissions through the use of low-carbon forms of energy. Their real significance lies in the engagement of whole communities in the energy agenda. Indeed, part of the excellence of microgeneration is that it reconnects the citizen to energy sources. The schemes inform and may even enthuse communities about the benefits of low-carbon energy and the need to use energy efficiently.

The Government already do much to support community energy schemes. The clear skies initiative and the major photovoltaics demonstration programme provide funds for renewable installations in the community. So far, we have funded 370 community installations through the clear skies programme, and another 46 community projects through the major photovoltaics demonstration programme. That work will be carried on by our £30 million low-carbon buildings programme, which will be launched in April.

My Department and DEFRA jointly fund the community renewables initiative, which has been instrumental in ensuring the success of many community projects. My right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has supported the community energy programme. This capital grant programme is aimed at increasing the development and installation of community heating schemes throughout the UK. The programme’s schemes are based mainly on combined heat and power, but several renewable-based schemes have also been supported.

Joan Walley (Labour, Stoke-on-Trent North)

It would be very helpful if my hon. Friend could tell the Committee whether applications for that funding can be made now, and what the application arrangements will be.

Malcolm Wicks (Labour, Croydon North)

I presume that my hon. Friend means applications under the carbon buildings programme. The answer is probably no at the moment, because we are launching the programme in April. I will write to her with the details, however, and tell her if I am wrong.

The programme should deliver more than 28,000 tonnes of carbon a year by 2010 and help more than 29,000 people on low incomes to heat their homes. On Second Reading, I indicated that we did not see the need to have a specific duty in relation to the promotion of community energy. After further thought and after correspondence with our DEFRA colleagues and my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, we have agreed in principle such a provision would perhaps be helpful.

In summary, I am happy to support the clause, as amended.

Malcolm Wicks (Labour, Croydon North)

The amendment would put a duty on the Secretary of State to lay a report before Parliament on steps taken to promote community energy. I have no problem with the idea behind the amendment, but I suggest that such a report should be included in an annual report on implementation of the energy White Paper. Having only one report on our energy policy achievements is a much more coherent approach and probably a more efficient use of energy than having several reports, perhaps produced at different times. On that basis, I am happy to lay before the Committee a new clause along those lines in our next sitting. I hope that that is acceptable to the hon. Member for Bexhill and Battle, and I therefore agree to consider amendment No. 33.

Gregory Barker (Conservative, Bexhill and Battle)

I am grateful to the Minister for that considered response, and I look forward to seeing his proposals at our next sitting. I beg to ask leave to withdraw the amendment.

Clause 10 - Renewable heat obligation

Joe Benton (Labour, Bootle)

With this it will be convenient to discuss the following: Government new clause 3—Renewable heat—

(1) It shall be the duty of the Secretary of State to take such steps as he considers appropriate to promote the use of heat produced from renewable sources.(2)For the purposes of subsection (1), heat produced by any plant is produced from renewable sources to the extent that the plant is fuelled by renewable sources.

(3)The steps which the Secretary of State may take for the purposes of subsection (1) include, in particular, steps for the purpose of promoting—

(a)the installation of plant which is or may be fuelled by renewable sources,

(b)the adaptation of plant so as to enable it to be fuelled by renewable sources, or

(c)the production of heat by plant which is fuelled partly by renewable sources and partly by other sources.

(4)In this section—

“fossil fuel” means coal, substances produced directly or indirectly from coal, lignite, natural gas, crude liquid petroleum, or petroleum products (and “natural gas” and “petroleum products” have the same meanings as in the Energy Act 1976 (c.76));

“plant” includes any equipment, apparatus or appliance;

“renewable sources” means sources of energy other than fossil fuel or nuclear fuel.’.

And the following amendments thereto: (a), at end of subsection (1) insert—

‘(1A)Before taking any such steps the Secretary of State shall satisfy himself as to—

(a)the most cost effective; and

(b)the most practicable,

method or methods of promoting heat from renewable sources.

(1B)The Secretary of State shall publish in whatever form he sees fit his conclusions reached pursuant to subsection (1A).’.

(b), at end of subsection (3)(c) insert—

‘(3A)The Secretary of State shall lay before Parliament an annual report on—

(a)steps that he has taken to promote renewable heat and any steps that at the time of the report he proposes to take; and

(b)the effect of any steps taken by him and an assessment of any steps specified in the report that he proposes to take.’.

Government amendment No. 14

Malcolm Wicks (Labour, Croydon North)

Although it is important to promote renewable heat, it is also important to find an effective way of doing so, particularly in terms of carbon savings and costs to the consumer. The heat market is vastly different from the electricity market—for example, in the number of suppliers and the scale of installations. We do not consider that an obligation in relation to heat similar to the renewables obligation is necessarily the most effective measure to support renewable heat generation.

The biomass taskforce and the Scottish renewables forum recently suggested that the complexity of such an obligation led them to believe that other measures were more appropriate to bring forward renewable heat at this time. The Government agree, and therefore do not support the proposal for a renewable heat obligation in clause 10. Although a renewable heat obligation is not the correct approach, we remain committed to promoting renewable heat. We already support renewable heat projects through the bioenergy capital grant scheme, the clear skies initiative and the community energy programme. Support for renewable heat will continue in the low carbon buildings programme, to which I referred earlier.

The Government are considering their overall approach to renewable heat in the context of our response to the biomass taskforce. We are carrying out further analysis on all the taskforce’s recommendations. That analysis will take account of the recent study by Future Energy Solutions, which carefully considered renewable heat, combined heat and power and the carbon savings likely to be associated with each, and the Carbon Trust report on biomass.

Bioenergy is the largest potential contributor of renewable heat, and the Government are committed to responding fully to the taskforce report by the end of April. That will include responding to its recommendation for a capital grant towards bioenergy heat and combined heat and power projects, and the recommendation on longer-term support measures. The Carbon Trust is currently scoping a project to accelerate the development of biomass in the United Kingdom, focusing on heat. The European Commission is likely this year to bring forward measures to support biomass under its biomass action plan. Measures to support renewable heat are being considered also in the context of the climate change review and the new energy review.

As the hon. Member for Edinburgh, North and Leith indicated, amendment (a) to new clause 3 would require the Secretary of State to publish his considerations on the cost-effectiveness and the practicality of methods of promoting renewable heat. The Secretary of State would of course have regard to those issues in putting forward options to promote renewable heat. However, there are significant difficulties in defining them in the Bill. For example, how does the amendment define cost-effectiveness? For whom would the measure be most cost-effective—the Exchequer or the consumer? What is the relationship between the potentially conflicting requirements of practicality and cost-effectiveness?

Given the difficulties attached to the implementation of amendment (a), the Government do not support it. We are content to consider reporting on the Secretary of State’s duty to promote renewable heat as proposed in amendment (b) to new clause 3, but we do not feel that the reporting requirement should be expressed in the Bill in that way. We would prefer to report on the duty to promote renewable heat in the context of our reporting under the Sustainable Energy Act 2003. That would be more appropriate, given the need for a consistent approach on all our reporting responsibilities on other aspects of energy policy. We will consider the reporting requirements further, and we aim to table a new clause for the next sitting.

In case anyone has not followed all that I have said, let me say that I oppose clause 10 standing part, but support new clause 3. I support amending the title of the Bill, as proposed in Government amendment No. 14, to reflect the content of new clause 3. I would resist amendment (a) to the new clause, but I will consider amendment (b).

Mark Lazarowicz (Labour, Edinburgh North and Leith)

The potential for renewable heat is widely recognised, but the UK as a whole has yet to take full advantage of it. That was the reason behind clause 10.

I am aware that there is still a considerable lobby among those who favour renewable heat in support of a specific obligation. I understand what the Minister said, however, about the need to develop the best way of taking renewable heat forward. I am influenced by the fact that even some in the renewables industry are not necessarily convinced that a renewable heat obligation is the right way forward, so I accept the changes that the Government propose.

I ask the Committee to support new clause 3. Although it was tabled by my hon. Friend the Minister, I was involved in discussions with the Department about its contents. I understand the reasons for the Government’s opposition to amendment (a) to new clause 3. It would help if the Minister could give more detail either today or in writing about how he would satisfy himself as to the most effective and practicable way of taking forward renewable heat. As for amendment (b) to new clause 3, I shall be happy in due course to accept a revised provision, as outlined by the Minister.