Energy Bill

Public Bill Committee, 28 February 2008.

Clause 36

Sir David Amess (Conservative, Southend West)

I remind the Committee that, with we are taking the following: New clause 6—Feed-in tariffs

‘(1) The Secretary of State may by regulations make provision to introduce feed-in tariffs for renewable micro-generation and decentralised energy.

(2) In this section—

“feed-in tariffs” means a requirement on utilities to buy electricity from renewable sources at a feed-in rate to be set by the Secretary of State, dependent on available renewable technology;

“micro-generation” means any generation under 250kW;

“renewable energy” means any form of energy produced in the generation stage without using fossil fuels or emitting carbon;

“a feed-in rate” means a guaranteed payment by the energy suppliers for each kilowatt of electricity generated.’.

New clause 8—Feed-in tariffs (No. 2)

‘(1) The Secretary of State may make regulations for the purposes of requiring designated electricity suppliers to purchase the electricity generated from renewable sources by small-scale generators (“feed-in tariffs”).

(2) For the purposes of subsection (1)—

(a) “small-scale generators” are persons generating electricity below a level to be determined by the Secretary of State following consultation,

(b) “renewable sources” are such energy sources as may be determined by the Secretary of State following consultation,

(c) “designated electricity suppliers” are those persons licensed by the Secretary of State to supply electricity as set out in section 6 of the Electricity Act 1989.

(3) The Secretary of State must consult for the purposes of determining the appropriate form of regulations as set out in subsection (5) below and must—

(a) commence such consultation within a period of six months of the day on which this Act is passed,

(b) determine a reasonable period of consultation,

(c) consult with—

(i) designated electricity suppliers,

(ii) the National Consumer Council (incorporating energywatch),

(iii) the Gas and Electricity Markets Authority (“GEMA”),

(iv) the National Grid,

(v) such generators of electricity from renewable sources as he considers appropriate,

(vi) such environmental organisations as he considers appropriate, and

(vii) such other persons as he considers appropriate.

(4) The Secretary of State shall, within six months after the end of such consultation, make regulations for the purpose of bringing into effect feed-in tariffs pursuant to subsection (1), in such manner as the Secretary of State shall consider appropriate.

(5) The regulations mentioned in subsection (4) above must—

(a) define the renewable sources in respect of which feed-in tariffs shall apply,

(b) define the maximum level of electricity generation in respect of which feed-in tariffs shall be available, as referred to in subsection (2)(a) above,

(c) define which persons generating electricity from renewable sources shall be eligible for feed-in tariffs,

(d) prescribe the means by which tariffs applicable under feed-in tariffs are to be calculated and, where necessary, amended,

(e) prescribe, where appropriate, the terms and duration of the feed-in tariff arrangements,

(f) make provision for the payment and incidence of the costs of connection of relevant small-scale generators to the National Grid,

(g) make provision for the regulation of feed-in tariff arrangements by a designated body,

(h) make provision for the Secretary of State to report periodically on the effectiveness of the regulations made under subsection (1) in achieving their objectives,

(i) provide for the making of any necessary amendments to distribution licences or supply licences held by any person, and

(j) make such changes as may be necessary to existing legislation, including that providing for the Renewables Obligation Order.’

New clause 14—Tariffs for renewable energy

‘(1) The Secretary of State may by order impose on each energy supplier falling within a specified description (a “designated energy supplier”) an obligation to reimburse producers of renewable energy falling within a specified description (a “renewable energy producer”) for each unit of renewable energy produced as set out in subsection (4) (and that reimbursement rate is referred to in this section as a “renewable energy tariff”).

(2) The descriptions of energy supplier upon which an order may impose the renewable energy tariff are those supplying electricity or gas—

(a) in Great Britain;

(b) in England and Wales; or

(c) in Scotland,

excluding such categories of supplier as are specified.

(3) In this section—

“renewable source” has the same meaning as in the Utilities Act 2000 (c. 27);

“renewable energy” means energy from renewable sources;

“renewables obligation” means the obligation specified in section 32 of the Electricity Act 1989 (c. 29);

“specified” means specified in the order.

(4) The renewable energy tariff shall set the reimbursement level for each kilowatt hour of energy produced by the renewable source and may—

(a) be set at different levels for different types of renewable source,

(b) be varied at different times as prescribed in the order or in successive orders.

(5) The order shall set out—

(a) the renewable sources in respect of which renewable energy tariffs shall apply,

(b) the tariff applicable to each renewable source,

(c) which installations shall be eligible for renewable energy tariffs, and any provisions to exclude installations accredited under the renewables obligation,

(d) which renewable energy producer shall be eligible to receive renewable energy tariffs,

(e) which designated energy supplier shall be responsible for paying the renewable energy tariff to a particular renewable energy producer,

(f) the terms and duration of the renewable energy tariff arrangements,

(g) how the amount of energy produced and upon which the renewable energy tariff is payable shall be measured, determined or deemed,

(h) provisions for the regulation of renewable energy tariff arrangements by a designated body,

(i) provision for the Secretary of State to report periodically on the effectiveness of the regulations made hereunder,

(j) any necessary amendment to distribution licences or supply licences held by any person, and

(k) such other provisions as may be required for the efficient and cost-effective operation of the renewable energy tariff.

(6) Before making an order, the Secretary of State must consult—

(a) the Authority,

(b) the energy suppliers to whom the proposed order would apply,

(c) representatives of renewable energy producers to whom the proposed order would apply, and

(d) any other persons he considers appropriate.

(7) An order under this section shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.’

Charles Hendry (Conservative, Wealden)

It is a pleasure. Mr. Amess, to be back under your chairmanship this morning. We finished our previous sitting with an extended, but appropriate, speech by the Minister. Members of the Committee were slightly surprised when I encouraged him to extend it further, but I wanted to prove my alphabetical prowess by noticing that he had missed out a few letters during his journey through the clause.

This part of the Bill will be subject to substantial debate. Some of the issues that we shall discuss this morning were chosen to be debated on Second Reading by many hon. Members. They are the sort of matters that people have focused on particularly in their representations to the Committee.

I shall start by speaking to clause 36 stand part, after which I shall introduce new clause 6 tabled in my name and that of my hon. Friend the Member for Billericay. We believe that most elements of clause 36 are standard and sensible. In general, we support the changes but, as I have said, it is against a background of a significant failure of the Government to encourage take-up of renewable energy in the United Kingdom. The other day I said that we were the second worst for renewable energy in the European Union, but I gather now that we are the third worst. It is not only Malta that is worse than us, but Luxembourg. It is a bit of a league of shame to be 25th out of 27 nations.

The Government should not boast about what they are doing, when the reality is that we have come late to the issue and are now trying to catch up with what other countries have already achieved. We hear the Minister talking about his targets and hopes, while his counterparts in Germany and other European countries can talk about their success in this area. It is that success that we need to emulate.

We are moving away from the targets that the Government had set. They had originally set a target of 10 per cent. of our electricity to come from renewable energy by 2010. When that looked hard to meet, it sort of morphed into a target of 20 per cent. by 2020. We know from the Minister’s written reply to me a few weeks ago that the Government have now downgraded those targets and it may be as low as 8 per cent. of our electricity coming from renewable sources by 2010 and as low as 12 per cent.—not 20 per cent.—by 2020.

That is made particularly clear in respect of microgeneration. In an article in The Guardian a week or so ago, Ashley Seager wrote:

“BERR is set to under spend the paltry £18 million in domestic grants of its low carbon buildings programme by £10 million over the three years to March 2009. This is in spite of strong demand for renewables among the public sector.

How bad is the situation? Well, BERR handed out grants for parts of the cost of fitting solar photovoltaic systems covering only 270 houses last year. The Germans fitted 130,000. We have a total installed capacity (including commercial) of 16 Megawatt peak (Mwp). They have 3,800 Mwp.

But even worse, during the year the pace of grant-giving slowed. Last May BERR simply slashed the grants and made them more difficult to get. The result, entirely predictably, was a collapse.

Throughout much of 2006, for example, it was making 30-40 grants a month for ground source heat pumps. In the last three months of 2007, no such grants were made. There is a similar decline for solar thermal...and micro wind turbines. Not a single grant was allocated for a domestic solar PV system last month, while the Germans installed about 12,000 systems.”

That was quite a lengthy quote, but it makes a clear point that we had not one grant for PV in the United Kingdom last year compared with 12,000 installations in Germany.

Brian Iddon (Labour, Bolton South East)

We cannot underestimate the success of the Germans. Like the hon. Gentleman, I am aware of their progress on renewables, but the influence of the Green party has altered the debate in Germany to such an extent that nuclear power is completely ruled out, so it has had to make progress in renewables whether it wanted to or not.

Charles Hendry (Conservative, Wealden)

The hon. Gentleman has pointed out an interesting dilemma that faces the German Government of how they can be green at the same time as phasing out nuclear. They have a particular challenge, and the rather unnatural coalition that exists in Germany exacerbates that problem.

Albert Owen (Labour, Ynys Môn)

My hon. Friend the Member for Bolton, South-East is right that the Greens had a huge influence, but is it not the case that the current German Government are actually looking to extend their nuclear fleet? They are looking at extension of each of their stations, which is causing them some difficulty, as they cannot meet the demands of economic growth.

Charles Hendry (Conservative, Wealden)

There is a tremendous tension in the German Administration on this—the CDU elements are keen to go down that route but the socialists are not. It is a very different approach and perhaps the Minister might wish to encourage his German counterpart to understand the British Government’s position on this issue. I do not think we should underestimate the very real tension that exists in the German Administration on this issue.

Malcolm Wicks (Labour, Croydon North)

I am sorry to subject the hon. Member for Wealden to a series of interventions, but I was thinking that one day, a long time hence, it could be useful practice for him. He quotes the article in The Guardian, which I read with great interest. I think it raises an interesting issue, because sometimes there is a confusion between overall renewables policy—which includes the big plant of huge wind farms offshore and so on—and a subset of that issue, which is very important and about microgeneration.

Now, The Guardian article, having said the Government are rubbish at renewables, then only talked about the low carbon building programme, as the hon. Member for Wealden has done. Does he recognise that these are complementary issues, but rather different? Is his new clause about renewables generally, and the virtues of a feed-in tariff, or is it just about microgeneration?

Charles Hendry (Conservative, Wealden)

I am very grateful to the Minister for giving me practice in this role. I have, indeed, been learning carefully from him, and what I have learned is to say that I will be coming to that in my speech in a very short time. It is one of the issues that I most particularly want to address, but the particular issue of the new clause—and of that being tabled by the Liberal Democrats as well—is feed-in tariffs and how they can encourage microgeneration. However, they need to be seen against the background of the more general challenge to us in this country about renewables.

Looking at the potential for renewables in this country, we have 40 per cent. of Europe’s wind. We have massive tidal and wave potential; we have PV potential—particularly in the south of England. That does not even touch on the potential for the generation of domestic heat through solar thermal technology or ground and air source heat pumps.

We are all clear that our energy security does not depend on one source of energy. With one third of our generation capacity, about 30 GW, coming out of commission in the next 20 years, we face a very real challenge in keeping the lights on. I think people in this country would never forgive a Government who allowed their lights to go off. They get used to that in the United States, but in this country we are a civilised, developed nation and we are not prepared to put up with that sort of thing. [Interruption.] The Minister may draw whatever conclusions he wishes from that. But the reality is that, in this country, we have to put in place the measures that will ensure that the lights stay on in 20 or 30 years’ time.

On top of that energy security challenge, we also need to get as much energy as possible from carbon-free and renewable sources. That means we will need more wind, more solar PV and more decentralised energy and combined heat and power—which I think is a very serious omission from this Bill. We will need much greater strides towards energy efficiency, a breakthrough in marine and tidal power—and I made the observation the other day about the comparison with Portugal. We should not be looking to be comparable with a small nation with a relatively small coastline like Portugal. We should be looking to lead the world in this. There needs to be more biogas and biomass; there needs to be hydropower, and indeed a whole range of technologies which we have not yet thought of—although I imagine the hon. Member for Bolton, South-East probably knows more about them than the rest of the Committee put together.

I referred to wind as being part of that equation. We need to recognise that the Government’s targets for offshore wind are very challenging indeed. They set out a target of 25 GW of new offshore wind by 2020. Various people who are in favour of that say it means about two turbines per day over the next 10 years. Those who are against it say that it could mean as many as 10 turbines per day. The reality will presumably be somewhere in between. However, the National Grid expects that, on current policies, we will have only 12 GW of additional wind onshore and offshore installed by 2020. That is well below the Government’s target. The Government therefore need to give us much greater clarity about how they expect that 25 GW to be delivered.

In addition to that, the Government have signed up to the EU’s proposal to ensure that the EU gets 20 per cent. of its energy—not its electricity—from renewables by 2020. When Prime Minister Blair returned, having signed up for that, our sense was that he had not quite understood what he was doing. We picked up that the reaction from officials in the Department for Business, Enterprise and Regulatory Reform was one of complete of horror that he had signed up for a target involving 20 per cent. of energy and not 20 per cent. of electricity. It is going to be an incredibly challenging objective. He may have known exactly what he was doing, knowing that he was stepping down in a few months’ time and that this would be something for his successor to lead us to instead.

For the United Kingdom to move to that target, a massive change has to take place. It is likely that our contribution towards the EU target will be that approximately 15 per cent. of our energy will need to come from renewables by 2020. In which case, we will need a much higher proportion of our electricity to come from renewables. The people who know most about this subject estimate that perhaps 40 to 45 per cent. of our electricity will have to come from renewables in just 12 years’ time. That is a staggering challenge.

To put that into figures, if we think that in 2020 the peak electricity demand will be similar to today—it is a brave challenge, because it means that there has to be very strong progress towards energy efficiency—we will need about 62 GW of peak energy capacity. If we were to go for the lower figure of renewables—about 40 per cent.—we would need to be getting 25 GW of electricity from renewables by 2020. On top of that, the reality is that most renewables do not work at full tilt all the time. The Severn barrage, if it were built, would be able to give absolutely predictable flows of energy. However, wind turbines, for example, cannot. A typical load factor would be 30 per cent. for onshore wind farms and perhaps 40 per cent. for offshore wind farms. So if wind alone was to deliver that 25 GW, we would need an installed capacity of wind of 60 to 75 GW, compared to 2 GW today.

Martin Horwood (Liberal Democrat, Cheltenham)

Will the hon. Gentleman give way?

Charles Hendry (Conservative, Wealden)

We need to know from the Minister, or perhaps from the Liberal Democrats, how we are going to achieve that. If we are not going to be achieving it through wind, the Minister needs to tell us where we are going to get that renewable capacity from.

Martin Horwood (Liberal Democrat, Cheltenham)

This argument is often put forward as a way of casting doubt over the potential of renewables in the long term to support our overall energy needs. Does the hon. Gentleman not accept—as he points out—that some of the technologies such as tidal stream, tidal flow and tidal impoundment are enormously predictable, far more so than nuclear power stations for instance, which often have a downtime? In the full range of different renewable technologies—even with wind and photovoltaics—those variants get ironed out quite substantially. There is therefore a very predictable way in which renewables can contribute overall to base load and peak capacity.

Charles Hendry (Conservative, Wealden)

There is some predictability. However there is an exponential difference in terms of the speed of the wind power and the energy it produces. So, if the wind drops slightly, there is a significant drop in energy which is quite a challenge for the National Grid to manage. Similarly, with PV, if the sun goes behind a cloud, there can be dramatic changes in the power that can be generated in that way.

I said that things such as the Severn tidal barrage or lagoons would be able to deliver predictability and other tidal lagoons could work in the same way. However, the challenge for renewables overall is that, in most aspects of renewables, there will be a lower load factor than in other forms of electricity generation. That is not to cast doubt on whether it is the right way to go—I believe it is the right way to go—but we also need to be realistic about what can be achieved.

The hon. Gentleman also mentioned nuclear power. Sizewell B has now been operating non-stop for about 500 days, at full tilt, so the modern fleet of nuclear power stations can deliver a tremendous amount of predictability.

Steve Webb (Liberal Democrat, Northavon)

In a non-partisan spirit, I welcome the hon. Gentleman’s support for renewables and I want to embolden him. It is clearly true that an individual turbine may be on or off, but given that we are talking about a network of turbines around the country and a whole mix of renewables, does he not agree with the modelling evidence that the aggregate renewable input is pretty predictable? Would he not further accept that the National Grid is “incredibly relaxed” about the issue of incorporating variable renewable input into the grid—it does not see it as a problem.

Charles Hendry (Conservative, Wealden)

The reality is that, in a country such as this, the wind is blowing somewhere. There are a perhaps a few cold, still, winter days when there is not any wind movement. [ Interruption. ] My hon. Friend the Member for Billericay says that there is plenty of wind blowing in this room and, across the country at some point, there is almost always going to be wind capacity.

We are right to recognise the average load factor. Countries that have gone into this technology in a big way, such as Spain, find a typical load factor of 25 to 30 per cent. We should be realistic. If we want to achieve a huge input of electricity from renewable sources, we have to take account of the load factor. Therefore, challenging amounts of installation are required to meet that.

The Government are right to introduce banding. There is overwhelming agreement that, unless banding is introduced, renewables obligation certificates will go to the cheapest technologies, such as methane and onshore wind farms. We recognise that there are already questions about the level of the bandings—for example, will two ROCs be enough to stimulate investment in marine and tidal technology? There is an issue there and many in the industry have profound concerns. However, there is no doubt that the banding proposals are a move in the right direction.

I have specific questions about the Bill, before coming on to the new clause on feed-in tariffs. It is not clear precisely what proposed new section 32A(4) to the Electricity Act 1989 is about. In which circumstances will a ROC apply only to one part of the United Kingdom? What is the breakdown on that? I am not sure if the Minister is referring to Scotland or Northern Ireland, for example, or to a smaller element like Croydon, which we know from what he said earlier is an area of outstanding natural beauty with great wind potential. Can he be clearer about what the proposed new section means?

On proposed new section 32B(3)(b), what is the situation if the electricity is exported, for example, through the interconnector? Can ROCs be used only with regard to electricity generated in the UK and sold to customers in the UK or can they also be used with regard to electricity generated in the UK and sold abroad? Particularly, I would like to draw his attention to proposed new section 32B(10)(d) on page 21. For the benefit of the Committee I will read that out:

“Those ways are—...

(d) being used, as respects part, as mentioned in one of paragraph (a), (b) or (c) and as respects the remainder—

(i) as mentioned in one of the other paragraphs, or

(ii) as respects part, as mentioned in one of the other paragraphs and as respects the remainder as mentioned in the other”.

Malcolm Wicks (Labour, Croydon North)

That is perfectly clear.

Charles Hendry (Conservative, Wealden)

I am glad that the Minister tells us that it is perfectly clear. We are looking forward to his detailed explanation. I wish to be there with the Minister when the Plain English Campaign next come to present the gobbledygook award. There are sometimes elements of legislation that are, to some extent, opaque. This is more opaque than we are used to.

The Minister could also give us greater clarity about proposed new section 32M—the fossil fuel reference is rather vague, and what parameters are involved? We certainly think it sensible that, as in proposed new section 32H, small payments can be carried over. That is a practical way to avoid unnecessary costs and excessive burdens. It brings us to the heart of the problem with the Government’s proposals and to the new clauses on feed-in tariffs.

The truth is that ROCs are too bureaucratic and are not well suited to microgeneration. The Government approach to microgeneration has failed to deliver the goods. There is massive potential in the United Kingdom for huge growth in microgeneration, but that could be thwarted by the Government’s lack of imagination about how to fund its growth.

Hugo Swire (Conservative, East Devon)

I am most grateful to see my hon. Friend in person having been woken by him this morning when he was sticking it up the Government, which he is continuing to do with tremendous aplomb. [ Interruption. ] This morning, he was talking about post offices.

Does my hon. Friend agree that this is an opportune moment for the Minister to speak a little about the anomalies when he replies? In Scotland, wave attracts five ROCs and tidal attracts three ROCs, which is a phenomenal incentive for investment in Scotland that could cost investment in other parts of the UK because of the disparity.

Charles Hendry (Conservative, Wealden)

I am grateful for my hon. Friend’s remarks and for his clarification about how I managed to wake him this morning, although I felt that he used less than elegant parliamentary language.

Malcolm Wicks (Labour, Croydon North)

You are looking after Committee members rather well.

Charles Hendry (Conservative, Wealden)

Indeed. I am used to my constituents telling me that they went to bed listening to me on parliamentary programmes; they certainly went to sleep in the process. I am pleased to have had that invigorating effect on my hon. Friend.

My hon. Friend raises an important point, and there is a real issue. If we are serious about stimulating these technologies—marine and tidal—that are in their infancy and that have a tremendous amount of potential, we have got to make sure that the ROC is set at the right level. People will find it difficult to understand why different levels would be set in different parts of the United Kingdom. They would assume that, if that were the case, all the investment would go into Scotland even though there is tremendous potential in other parts of the United Kingdom for tidal and marine power to be developed.

There is strong agreement that ROCs are not the right way forward for encouraging microgeneration and decentralised power. An individual householder wanting to install photovoltaics or a small wind turbine will find that the complexity of the ROC system will make him lose the will to take the project forward; indeed it could well make him lose the will to live it is so complex. He wants three things: a simple system, a predictable income stream over a given number of years and an easy ability to see the return that he will get on his investment. The ROCs cannot do that but a feed-in tariff will.

There has been a debate about whether to replace ROCs with feed-in tariffs but there has been no common ground because of concerns about switching one system to another and how that could jeopardise long-term investment decisions. I understand that concern. There appears to be evidence that ROCs have merit for large projects while feed-in tariffs have merit for smaller systems. What we found overwhelmingly in the evidence to the Committee was that there is support for the move towards ROCs in that way. In its briefing notes, the BWEA said:

“BWEA supports the introduction of a feed-in tariff for small renewable systems generating under 50kW of electricity.”

The Energy Saving Trust, set up by the Government, said:

“We would welcome enabling measures in the Bill to introduce a feed-in tariff and signal the Government's positive approach to encouraging domestic microgeneration.”

The Royal Society for the Protection of Birds said it would like a system to

“pay small-scale generators a premium for the electricity they produce via a feed-in tariff”.

It goes on to quote the Stern review 2006, which said:

“Comparisons between deployment support through tradable quotas and feed-in tariff price support suggest that feed-in mechanisms achieve larger deployment at lower costs. Central to this is the assurance of long-term price guarantees.”

We also had a very helpful note from Friends of the Earth on this matter. [Interruption.] That is probably one of its members ringing to ensure I get this in. It says:

“Friends of the Earth believes there is an urgent need for the Government to introduce a feed-in tariff scheme to support an expansion of smaller scale and decentralised renewable electricity schemes including: domestic and commercial microgeneration, onsite renewable technologies, and community owned renewable electricity schemes. These are particularly neglected in current policy. The Government's recent consultation on the Renewables Obligation admitted that it was never designed to support microgeneration technologies.”

It also says:

“A feed-in tariff has many advantages over a quota system such as the UK's Renewable Obligation (RO). It gives certainty and guarantees for investors, is transparent, easy to administer, promotes diversity of supply and is flexible.”

It concludes:

“A feed-in tariff is a proven cost-effective mechanism for developing renewable electricity capacity which could be brought in alongside the RO reforms in the current Energy Bill to support smaller scale renewable technologies which are currently poorly supported by existing policies but which will be vital if the UK is to meet its EU target.”

We had the chance in the evidence sessions to question people further on those matters. I do not want to take up too much time going into these but some of them bear a small amount of repetition. Philip Pearson on behalf of the TUC said:

“There is a piece missing in the jigsaw, and that is to assign a portion of electricity to securing a feed-in tariff in the way that has happened in Germany and Denmark— particularly in Germany, where it has been enormously successful with approaching 200,000 jobs in renewables, driven by a support mechanism that we do not have.” ——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 7, Q11.]

We heard from Gaynor Hartnell of the Renewable Energy Association, who said:

“I was hoping to add to the question on green renewable technologies. I said that the renewables obligation is not a very suitable mechanism for smaller-scale generation. Similarly, it is not ideally suited for emerging technologies where one is expecting the price to go down fairly rapidly, because it builds in quite a lot of inertia. A feed-in tariff is more effective for that kind of technology as well. Our wave and tidal device developers look with envy at countries such as Portugal and Ireland, which have feed-in tariffs for renewables, and expect to do business in those countries where that policy makes the climate much more conducive to their business.”—— .”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 91-2, Q177.]

Finally, I have a couple of quotes from our environmental sessions. Russell Marsh from the Green Alliance said:

“We want the Energy Bill to have a power that enables the introduction of a feed-in-type mechanism, particularly for heat, although we also need a feed-in-type mechanism for smaller-scale electricity.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 68, Q132.]

We also heard from Benet Northcote of Greencoast—I am sorry, Greenpeace. I am not sure who Greencoast are, but they are probably on the roof of the building as we speak. He said:

“To reiterate on feed-in tariffs, they are also tremendously important. You must look at the success of countries that have adopted feed-in tariffs, notably Germany, where they are massively outstripping our delivery of renewables in terms of solar power and wind. It is acknowledged that the changes that the Bill makes to the ROCs and the current framework will not get us to the necessary targets.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 68, Q133.]

Malcolm Wicks (Labour, Croydon North)

May I repeat my question, and it is a genuine question, because I am interested in the argument? Is the hon. Gentleman advocating feed-in tariffs as a replacement for the renewables obligation or as a device for microgeneration? The arguments are rather different. I say that because, in the evidence that he cited, someone favoured feed-in tariffs for marine energy and talked about Portugal, and someone else talked about micro. What is his position?

Charles Hendry (Conservative, Wealden)

Our new clause makes that quite clear. We understand the concerns of those who currently benefit from ROCs, who believe that the transition from ROCs to feed-in tariffs would be too complicated and would jeopardise investment. We think that there may be a case for such a transition, but we do not think that this is the time. We therefore want the ROC banding system to move forward and we think that that is the way forward for the larger projects.

Feed-in tariffs are, however, the right way forward for microgeneration. In our new clause, we say that we will set microgeneration facilities at less than 250 kW, which is substantially higher than the Government’s current definition, although we think that is about the right level. We also see a case for introducing feed-in tariffs for emerging new technologies to which ROCs do not apply. They would, for example, be quite a good way forward for marine and tidal. We are not suggesting the wholesale replacement of ROCs with feed-in tariffs, but we see particular merit in the tariffs where microgeneration is concerned.

As the Minister will be aware, there was significant cross-party support for feed-in tariffs on Second Reading. As he has heard, people outside are urging us to go down that route, and he will have heard for himself in our evidence sessions that many people feel that feed-in tariffs are the right forward.

You will be aware, Mr. Amess, that two new clauses have been tabled on feed-in tariffs—one in the name of myself and my hon. Friends and one in the name of the Liberal Democrats. The approach that the Liberal Democrats propose is rather more prescriptive, but both approaches are equally worthy.

Dr. Alan Whitehead (Southampton, Test) (Lab) rose—

Charles Hendry (Conservative, Wealden)

I am happy to give way to the hon. Gentleman because he has also tabled a new clause.

Alan Whitehead (Labour, Southampton, Test)

I was merely going to point out that the new clause that I hope to move shortly also addresses this issue.

Charles Hendry (Conservative, Wealden)

I am sorry—I should have paid tribute to the hon. Gentleman for the work that he has done on this issue, both in Committee and outside. We owe him a great debt of gratitude. As he says, his new clause addresses similar issues and concerns.

We do not mind which approach the Government support, but they should support one. There is overwhelming evidence that we will need feed-in tariffs if we are to make the most of microgeneration, in particular. ROCs will never achieve the breakthrough that we need on microgeneration.

There are much wider issues about how we will achieve the extremely ambitious and challenging targets that the Government have set for renewables, and the Minister may wish to say something about that in due course. However, on the new clauses dealing with microgeneration below 250 kW, there is overwhelming evidence that feed-in tariffs should be the way forward, and there is overwhelming support for such an approach.

Sir David Amess (Conservative, Southend West)

May I point out again that we are debating clause 36 stand part, and no one is moving any new clauses? Those will be dealt with at the end of the debate, and it will be entirely up to hon. Members whether they wish to move them. However, we have grouped the three new clauses with the clause 36 stand part debate, so it is appropriate to debate them now.

Martin Horwood (Liberal Democrat, Cheltenham)

I will start by referring to something that the Minister said at a previous sitting. I have not yet had the opportunity to congratulate him on the birth of his grandson Matthew, which I am happy to do on this occasion. I am sure that it will give him a whole new perspective on biomass—it certainly did for me when I became a father.

The three new clauses are in the same territory—feed-in tariffs. I will not dwell for long on the clause, but the hon. Member for Wealden was a little unkind to the Government, because although we share many concerns about the performance of the renewables obligation and renewables obligation certificates as the basis for promoting renewable energy, it is true that if we accept that the renewables obligation is where we are at the moment and that it will be part of energy policy in the immediate future, the clause and the Bill as a whole take us forward quite significantly, in that the banding of ROCs in particular is a very positive step, which is widely welcomed by the renewable energy industry.

Having given that encouragement, I have to say that it is nevertheless true that the basis for all three options on feed-in tariffs is that the UK’s share of electricity from renewables is one of the lowest in the European Union at only 4.3 per cent., compared with the EU 25 average of 13.6 per cent. I am happy to accept that, in some cases, as in Austria, the very high percentages from renewables are due in large part to the geography of the country. At the same time, however, other countries that are not noticeably mountainous, such as Ireland, have exceeded our renewables percentage quite comfortably, with none of those in-built natural advantages, so the UK’s performance on renewables is poor.

A menu of options is before us. We think that our new clause 8 is the best and most comprehensive of the three on offer, but I am quite happy to admire the simplicity of the Conservatives’ new clause 6—it has a certain elegant simplicity. Both of our new clauses focus particularly on microgeneration and decentralised energy, but also on offer is new clause 14, which is in similar territory but has a broader remit. All these proposals can provide the basis for what I hope will be a real debate with the Minister about the potential for feed-in tariffs. Even if he does not accept any of the three options on offer today, perhaps he will introduce amendments at a later stage that go down the same path.

The problem with the renewables obligation scheme is that it is not really succeeding, even within its own terms, because the proportion of renewable energy generated within the scheme is falling as a percentage of the renewables obligation itself. In other words, the amount that is being fulfilled through the generation of renewable energy is falling compared with the proportion that is being fulfilled simply by the purchasing of ROCs. In 2006-07, 4.4 per cent. of the electricity supply came from renewable sources, against an RO level of 6.7 per cent., so the uplift that the renewables obligation is supposed to be delivering is not actually pulling up renewable energy in the same proportion. I am glad that the officials appear to concur with that conclusion.

As some witnesses said in our evidence sessions, planning issues may be involved, and other factors may be causing a drag on the uplift of renewable energy, but the contrast with the example of Germany is striking. Let us consider photovoltaics, for instance. To date, Germany has installed more than 3.5 GW of solar photovoltaics; the UK figure is approximately 15 MW—a pathetically small amount in comparison. Nearly 50,000 people are employed in the German solar PV industry; the UK has approximately 1,000. That includes 500 at Sharp’s European PV manufacturing plant in Wrexham, and 95 per cent. plus of the Wrexham output goes to Germany and other non-UK markets, so the extent to which the renewables industry in Britain is developing only with the encouragement of other countries’ renewable energy policies is quite striking.

The success story continues: in Germany, renewable electricity rose from 11.5 to 14 per cent. between 2006 and 2007. In the past year alone, there were 235,000 jobs in renewable energy as a whole in Germany. So that is an economic success story, and it is identified as such by the German federal Government.

Malcolm Wicks (Labour, Croydon North)

I am interested in the hon. Gentleman’s argument. He mentions the economic success story in Germany, but has he been able to do any research on the costs on the German feed-in tariff system, compared with, say, the £1 billion that we will be spending on the renewables obligation by 2010? Perhaps he has not, but that is a relevant consideration.

Martin Horwood (Liberal Democrat, Cheltenham)

I will emulate the hon. Member for Wealden, who is, like me, learning from the Minister, and say that I could write to the Minister in due course with that kind of information. Clearly, the perception in Germany is that there has been investment in and costs relating to the scheme, which is structured differently from the way that we have approached the matter in this country, but it has been a real success story and it has brought real economic benefit to Germany. All that has happened, of course, with fewer natural renewable resources than we have on these islands. We have an enormous amount more natural wind and wave potential, for instance, than Germany has.

I was interested in the comments made by the hon. Member for Bolton, South-East on the interplay in Germany and the presence of a strong anti-nuclear lobby in the Bundestag that has helped drive policy urgently towards renewables at the expense of nuclear. That rather supports the fears expressed by Greenpeace, Friends of the Earth and we Liberal Democrats about a risk of crowding out a real drive towards renewables by losing focus and being distracted by proposals to support the nuclear industry.

Brian Iddon (Labour, Bolton South East)

I can assure the hon. Gentleman that there is adequate pressure on the Minister from within his own party.

Martin Horwood (Liberal Democrat, Cheltenham)

I am absolutely delighted to hear that: if it comes from such a well-informed source, it will, I hope, prove effective.

Of course, it is equally urgent that we do not crowd out clean technology in general. Perhaps we have all been slightly guilty of focusing on renewables as the only clean path in the short term, whereas, as we have already discussed, carbon capture and storage and clean coal technology are equally important, at least as a transitional technology, in fulfilling the potential energy gap that the hon. Member for Wealden rightly raised concerns about.

Steve Webb (Liberal Democrat, Northavon)

In anticipation of the day when my hon. Friend is a Minister and I pass him notes, let me say that, on Second Reading, the Chairman of the Select Committee on Environment, Food and Rural Affairs, the right hon. Member for Fylde (Mr. Jack), said that it was a myth that the German feed-in tariff was

“some giant German subsidy or that it is costing German energy users an unaffordable amount—it is not, as the average figure is €2 per household per month.”—[Official Report, 22 January 2008; Vol. 470, c. 1414.]

That sounds like good value.

Martin Horwood (Liberal Democrat, Cheltenham)

I am, as ever, grateful to my hon. Friend for putting that on the record and saving me the trouble of writing to the Minister. That opinion underlines the point is that we are making. The beauty of the German scheme is that it provides an incentive not just for big generators, but for small and medium-sized enterprises and for microgeneration at community and household level. We have tried to facilitate that in new clause 8.

We propose enabling powers. We use the magic word “may”, which has been much discussed in the context of the European Union this week and the meaning of which is well understood. We are not mandating the Minister to do this straight away and not asking him to rush into things; we are asking him to go into it in a measured way and, I say quite explicitly, alongside the renewables obligation. In the evidence-taking sessions, quite a lot of witnesses said that they thought that it was perfectly viable to introduce a feed-in tariff system initially on a small scale but one growing in stature, alongside an existing renewables obligation. That is the basis on which we could do it. For example, if the system were introduced simply for microgeneration at first, that could provide a model for a wider scheme in due course.

Charles Hendry (Conservative, Wealden)

Does the hon. Gentleman agree that one of the great advantages of feed-in tariffs is flexibility? Therefore, we could start off by giving people a guaranteed amount in returns that the energy saved would produce over 20-year period, but as that technology takes off, we could reduce that for the next 20-year period. Each investor would have a sense of a guarantee about the returns that they would receive, but as the technology matures and moves forward, we could make a quick and easy change to the feed-in tariff; it is a flexible system.

Martin Horwood (Liberal Democrat, Cheltenham)

I completely agree. The flexibility and assurance that the feed-in tariff system would give to investors in certain industries is an important advantage.

Another advantage, one to which the hon. Member for Wealden referred, is its simplicity and therefore its accessibility to those who aim to generate renewably at a low level—for instance, households. In his opening remarks on the clause during our previous sitting, the Minister referred to village primary schools. I cannot imagine that a village primary school would be brave enough to take on the ROC system; it is an ambitious target. However, it is feasible under a system of feed-in tariffs and microgeneration that a village primary school might consider it, either through biomass or other technologies; it could feed into the grid and receive a guaranteed sum in return for the energy generated. In that way, a feed-in tariff system could release the innovative potential of individuals, businesses and communities, as it has in Germany.

I believe that we have chosen our moment carefully enough to give the Minister a system that could release that sort of potential without undermining the existing renewables obligation system at a larger level. I therefore hope that new clause 8 will attract widespread support. If the Committee senses that one of the other two new clauses on offer might provide a better path, I would be quite happy not to press our new clause at a later stage in favour of others—or, if the Minister gave sufficiently strong assurances, to consider other options that he might put on the table.

The Minister is presented today with a menu of options—a rich diversity of offers—all aiming to fulfil the hunger that we have for feed-in tariffs in the drive towards renewable energy that has been achieved in other European countries. We are opening the door for the Minister, so that he can be one of the greenest Ministers ever, in driving this forward in an imaginative way. I hope later to commend the clause to the Committee.

Alan Whitehead (Labour, Southampton, Test)

I shall speak to new clause 14. We have already heard that it is one of a plethora of options on how to address tariffs in the context of the renewables obligation. Before proceeding any further, in my view, it would be inappropriate to throw the renewables obligation system up in the air; the world would presumably have to stand still for a considerable period while a universal alternative feed-in tariff was introduced.

Indeed, investment decisions that have already been made, and investment plans that have yet to be made, as I know from discussions with a number of people who are thinking of investing in renewable energy, are all related to the continuation of the renewables obligation. Those decisions were considerably enhanced not by the passing of changes in the renewables obligation banding but by the anticipation that such a change will take place, and they would be put on hold or even jeopardised as a result of changing horses in midstream.

Whatever the universal abstract merits of a feed-in tariff might be, substituting it now would not be a good way forward in developing renewable energy installations in the UK. Indeed, one of the key lobbying elements of many of those who are looking to invest in renewable energy has not been about having a universal feed-in tariff but about ensuring a longer-term certainty for the status of the renewable obligation—and the status of the headroom behind it.

In that context, we must be careful not to look at the difference between the issuing of renewable obligation certificates and the amount of renewable energy that we have as though that difference represented a failure in the renewable obligations themselves. It is necessary to have headroom in the system. That is part of the mechanism that drives renewable obligation forward, because if there is headroom ROCs have a value; if there is no headroom, they have little value and the system does not work as well as it should do.

It is important not only to have certainty about the time span for the existence of ROs and the banding that they represent, but to have headroom in the system, so that ROCs have some value and there is, therefore, some ability to plan on the value of the certificates that come forward over a period of time.

Bearing those points in mind, we would need to be careful when considering whether to substitute the present ROC system with an entirely new system. As has also been remarked in Committee, there is before us a substantial development of investment in renewable energy. Part of our deliberation has to be about how to ensure that that happens and how best the different forms of renewable energy can be developed within the time scale that we seek.

It is also important that we are careful not to make comparisons between different countries’ levels of renewable energy without paying some attention to the circumstances in which those countries have operated in the past. It is not just about a feed-in tariff and—certainly, in respect of microgeneration in this country—it is not just about ROCs. For example, it appears that there has been relatively little take-up of grants through the low-carbon building programme, particularly for solar photovoltaics, for a variety of reasons.

I speak from experience, and I should declare an interest with respect to new clause 14: if it is carried with acclaim—or even carried—at a future date, I might benefit on the grounds that my house needs re-roofing and I will be re-roofing it this Easter, with a 3 kW solar PV ray embedded in the roof of the house. If there is an extremely generous feed-in tariff for microgeneration in the near future, I will be able to retire on the proceeds. However, in establishing the process by which that roof could be installed, one of the things that I came across was the planning regime, as do many people in such circumstances.

As those grants are presently constructed, certain requirements that relate to planning must be fulfilled before somebody can start to develop a timetable for the installation—getting the builder and the solar roofer together and so on. The hurdles are so considerable and the planning regime across the country for what people can and cannot do concerning microgeneration is so uncertain between authorities that, in this instance, I came to the conclusion that the best thing to do was to proceed without even applying for a grant, and that is what I have done.

I hope that help is at hand, by way of the imminent final lap of a change in the general permitted development order. That change was heralded by the Climate Change and Sustainable Energy Act 2006, which my hon. Friend the Minister had a substantial role in assisting during its passage through the House some while ago. The GPDO will be organised to provide a clear and understandable regime across the country with regard to what is permitted to be put on to roofs and in gardens and houses, and what is not.

Hugo Swire (Conservative, East Devon)

That is quite an ambition. Does the hon. Gentleman concede that, in my part of the world, existing buildings—very often thatched—are disadvantaged? Photovoltaic panels cannot easily be put on a listed thatched house in East Devon. Perhaps we should concentrate more on new build, rather than on existing build.

Alan Whitehead (Labour, Southampton, Test)

Indeed; the hon. Gentleman has a point. The sustainable buildings code will ratchet up the code level at which new build will take place up to 2016. After a certain amount of new build at particular code levels, that new build will require not only that houses are reactively energy efficient, but that they are proactively equipped for their own energy generation. That will be achieved through the installation of solar PV, turbines or ground-source heat pumps imbedded in the house as it is built, and it will be an important part of the new build microgeneration approach. Thatched buildings are rather bioefficient due to the thatch itself. Thatch could be seen as a form of long-term energy efficiency. I am not sure that those who developed thatched roofs in mediaeval times thought of them in quite that way, but that is how they are.

The issue for microgeneration is to ensure that the GPDO happens. That might be done by issuing a statutory instrument in the spring. If there are impediments, or if people put forward reasons at a late stage about why the SI cannot go ahead in April, a window of opportunity and a considerable period will be lost. It is important that the statutory instrument goes ahead and clarifies GPDO issue in April. In those circumstances—I put this in the conditional tense—I might have been the recipient of £2,500 to assist with my solar PV roof.

Charles Hendry (Conservative, Wealden)

I am interested to hear about the hon. Gentleman’s plans. If the system of support came through ROCs rather than from a feed-in tariff, would he bother to apply for ROC support for the project, or would he decide that the system was too complicated to bother about? One of our main concerns is that that sort of good practice, which we are keen to encourage, would come through feed-in tariffs, but not through ROCs.

Alan Whitehead (Labour, Southampton, Test)

The hon. Gentleman anticipates my next paragraph. The questions are, first, whether one gets any assistance for the development of such a project, and secondly, what the lifecycle of the project is after that and the extent to which that form, or other forms of microgeneration, can be subject to an efficient use of the ROC system. Given the output from the system that I am likely to have, I can probably apply for a ROC. I have not yet applied for it, so I am not certain how many hurdles need to be overcome. However, I certainly anticipate that it would be ROC-able.

However, there is a wider issue around ROCs and microgeneration. I would distinguish between the idea of changing horses in midstream as far as a universal feed-in tariff is concerned and the question of how we underpin microgeneration in the future. By and large, microgenerators have not accessed the ROC system so far. Some have done so in some circumstances, and there have been suggestions and, indeed, some changes in terms of whether one could have so-called ROC-ettes for microgeneration, and whether there should be ROC farming, whereby a number of sub-ROC microgenerators in an area gather together as a ROC farm and get a ROC at the end of the process. [Hon. Members: “Rock on. Northern Rock?”] Yes, it will be interesting to see whether confidence in the ROC system continues in the north and north-east of England to the same extent as in the south.

The central point is that, at the very least, we could and should look at whether some form of tariff system would be a way to develop microgeneration, either in parallel with or instead of the ROC system. First, it would not interfere with the long-term planning process. In effect, it would not change the system that applies to microgeneration, because the system of ROCs is undeveloped anyway. Also, because most microgeneration will be on the margin of ROC-ability given the lower levels that ROCs apply to anyway, a tariff system probably would represent an easier way to encourage the output of microgeneration than by trying to gather together part-ROCs and then deal them out to the various people who are in a part-ROC system through some form of farming.

My new clause 14 would give the Minister a great deal of leeway in deciding how such systems might develop. Indeed, it does not even include the expression “feed-in tariff”. It refers to how the Minister may develop systems and designate particular systems for such arrangements, and how he may address the producers of electricity in terms of what their obligations would be under such arrangements. It also enables the Minister to vary the tariff rates according to the kind of microgeneration or generation that is involved.

My modest suggestion is that, of the three new clauses on offer, mine represents the best present to the Minister—naturally, I would say that—but I join the hon. Member for Cheltenham in suggesting that this is not necessarily a question of having a mighty battle about which one gets the nod this morning. It seems possible, within the overall outline of the present system, to vary the approach that is taken to microgeneration. As far as our discussion today is concerned, that idea has legs, and if my hon. Friend the Minister is able to respond positively about how it may be taken forward, the question of whether one has a particular line here or there, or a new clause here or there, fades into the background.

Steve Webb (Liberal Democrat, Northavon)

It is a pleasure to follow the hon. Member for Southampton, Test. His contribution was well informed, as ever. With his reliance on solar photovoltaics, he will not be able to get a ROC around the clock.

I want to pick up on a few clause stand part issues that we have not dealt with. I expected the Minister to say a little more, because, like the hon. Member for Wealden, I was hungry for more when he was speaking last Tuesday. On the relative value of the bands—we are getting half ROCs, one and a half ROCs and two ROCs—the numbers in the most recent briefing seem to have changed slightly from those in the Library note, which is interesting. Will the Minister tell us the reason for having two? Why not have two and a half or 1.75? The numbers have a very specific implication—an extra amount of subsidy—so they must be pro rata to something. Will he say more about where the numbers have come from? I am sure that he knows off the top of his head, and any source would be fine.

The hon. Member for East Devon raised the next issue that I want to discuss. I must admit that I have learned something this morning: I had not come across McROCs before, but the fact that Scottish ROCs appear to have different rates from those south of the border is quite serious. Obviously, there is coast all around the British isles, but if there is a different rate of return north of the border, that is a significant issue. The Minister did not mention that in his introduction, so I hope that he will deal with that point.

Earlier, the hon. Member for Wealden and I had some exchanges about what will happen if the wind does not blow in one place, but blows elsewhere. Within the UK, there is scope for pooling: the wind is always blowing somewhere, so, provided that there is a comprehensive network, we will have a reliable source. The Minister will be familiar with the super-grid—a Europe-wide version of the same idea. Clause 36 is essentially a market mechanism. It puts a Government-induced price in, but leaves the market to decide on the mix. A Europe-wide network will not happen only on the strength of UK incentives, as in clause 36, but will need Europe-wide co-operation between other Governments on planning, international waters and so on. Does the Minister think that Governments should talk to each other about collaborative projects that clearly have a Government angle? Will he update us on the super-grid concept of a network of offshore wind power across European waters? Are the Government considering that?

Charles Hendry (Conservative, Wealden)

The hon. Gentleman makes a fascinating point. I am a great enthusiast for the super-grid. It is an extraordinary and exciting idea, and it would be wonderful if it happened. However, given that we have a ROC system in the UK and Germany has a feed-in tariff system, there will have to be some way of marrying up those systems. The grid will be in different territorial waters and investment will be according to where the system will have the most support. How does he think those systems could be reconciled?

Steve Webb (Liberal Democrat, Northavon)

That is an important issue. I assume that because different national economies will draw electricity from the super-grid at different points, when a British power company or electricity user draws electricity from the super-grid, reimbursement will be in the form of ROCs. In Germany, it might be used by German industry or generators. I imagine that that is how it could work. However, there might be perverse incentives. One can imagine it being drawn in one way and there being an inter-connector to sell it back. There must be co-ordination.

Charles Hendry (Conservative, Wealden)

That brings us back to the issue of exporting power, which I discussed earlier. The idea with the super-grid is that when the wind is blowing in the British part of the North sea, if the electricity is needed in Denmark or Germany, it will be sent there, where it will be bought. The whole notion of the super-grid is that it will be tradeable. Has the hon. Gentleman, or the Minister, thought about how that could tie in with the proposed system?

Steve Webb (Liberal Democrat, Northavon)

I share the hon. Gentleman’s interest in imports and exports. He raised that issue earlier, and I look forward to hearing the Minister’s response.

The only other issue that I want to raise, on which the hon. Gentleman might have touched briefly in a previous sitting, is the Ministry of Defence’s attitude to offshore and onshore wind. That is germane because clause 36 provides differential incentives in relation to offshore and onshore wind, which is great if DBERR is trying to promote such development, but problematic if, at the same time, the MOD is trying to stop it. We have had a written answer suggesting that the MOD has objected to a significant number of wind projects—I will give the Minister a reliable number in a moment. Defence Estates objects to more than half of all wind farm applications and the reason for that seems to be that the radar systems cannot cope. I find it alarming that advanced military radar systems cannot tell the difference between a stationary wind turbine and an incoming intercontinental ballistic missile. That is alarming on several levels.

The Ministry of Defence says no because it can, but really it ought to be asked more difficult questions. Why does our Ministry of Defence want to block so many applications whereas other Ministries of Defence, which presumably also want to tell the difference between an incoming missile and a wind turbine, appear not to be blocking them? Surely, if there is a general radar and air traffic issue, Britain will be affected in the same way as mainland Europe. Why is our Ministry of Defence being picky? A written answer from the Secretary of State for Defence says that the MOD has opposed 28 wind farm applications between 2005 and 2007. Defence Estates itself objects to just over half of 1,000 project application pro formas that it receives annually. There is a substantial problem and it is getting worse. I hope that the Minister will take action to deal with it.

Anne Main (Conservative, St Albans)

Does the hon. Gentleman agree that the timing of some of the objections is a problem? Often, there is no voice against an application until a very late stage. I was talking to the wind energy companies about that, and it is disheartening for them to face significant costs and disappointment at a late stage of the planning application.

Steve Webb (Liberal Democrat, Northavon)

The hon. Lady is absolutely right. Apparently, in some examples, initial consent is given, the process drags on and the consent is then revoked, which makes the whole process much more expensive. On the one hand, we are trying to give incentives through clause 35; on the other, another arm of Government is making this form of development more expensive. There are a whole raft of examples of that.

Stephen Ladyman (Labour, South Thanet)

I am concerned that the hon. Gentleman is being a little unfair to the MOD. It is true that air traffic control centres and the MOD raise objections to wind farms. They did so in the case of the London array, which was being built off the shore of my constituency, but eventually the concerns were negotiated away. That seems to be the pattern: they register their objection to get people to the table and negotiate the problems away.

Steve Webb (Liberal Democrat, Northavon)

If that were the case, the picture would not be as bad as the one I am painting, but there are two problems. First, when the MOD does not register an initial objection, the wind turbine does not end up in a different place and remains where it always was. Then two years later the MOD suddenly decides that there is a problem. That must be unacceptable, as I am sure that the hon. Gentleman would agree. Secondly, such objections add to the cost of the process. If there are legitimate objections—and in some cases there will be—they need to be addressed quickly, but unpredictable behaviour and long delays cannot be the way forward.

I have a whole sheet of examples but I will spare the Committee those and give one example. Fallago Rig in the Scottish borders is a 144 MW wind farm. Nearly three years ago in 2005, a formal planning application for 62 turbines was submitted. The MOD confirmed to the Scottish Executive that it had no concerns about the project, but the council objected on the grounds of the way it looked. A re-submitted smaller application for 48 turbines was made in October 2006, and in March 2007 the MOD objected to the smaller wind farm. There may be a technical reason for that, but one senses that there was an internal policy shift. I find that concerning because, as far as I know, other similar Ministries are not doing the same thing. In this project, more than £1 million has already been spent on development costs. If the obstacles are insuperable, why should people make such an investment in our country when other Ministries of Defence do not make the same objections?

Stephen Ladyman (Labour, South Thanet)

I wonder whether the hon. Gentleman appreciates the irony of what he has just said. He makes a big deal about the MOD making a complaint on rational grounds, which I argue will get negotiated away, but he skates over the fact that the local council objected simply because of the way the project looked.

Steve Webb (Liberal Democrat, Northavon)

That is part of the planning process and the council had a democratic right to make those observations. Central Government cannot stop local authorities expressing those views; nor should they. The hon. Gentleman is being too glib in saying that the problems will all be negotiated away; what if objections are erratic, come late in the process and take a long time? Wind farm folk who come to talk to me say that it is hard to get to the key decision maker in the Ministry of Defence, and that they do not get responses. If there are particular objections, they are not negotiated, and there is paralysis, which is a problem.

Charles Hendry (Conservative, Wealden)

Is not the vital point that the council was right to object, but it did so at the appropriate time? What went wrong was that the Ministry of Defence said initially that it had no objections, but subsequently changed its mind, by which time the company had spent an enormous amount of time and money on development. Everyone understands that the Ministry of Defence has an absolute right to object on grounds of national security and radar issues, but it should do so at the appropriate time. Furthermore, the MOD’s vision is that every wind farm application that has ever been submitted is still a live application, even when they have been dropped. It thinks that it is looking at masses more applications than is the case.

Steve Webb (Liberal Democrat, Northavon)

I think that that is right. The Ministry of Defence has a legitimate role, but if there is an insuperable issue, or one that needs addressing, it must raise it at the start, it must be consistent, and the matter must be resolved quickly. None of that is happening. If the Minister wants clause 36 to work, and the banded renewables to provide the incentives that he wants, he must assure us that he is—dare I say it?—banging heads together in the Ministry of Defence to try to get it to stop behaving inappropriately.

Malcolm Wicks (Labour, Croydon North)

I was listening with great care to the discussion about the MOD, and I hope to be able to say something about that. The matter is obviously one of concern, but I think that we are making progress. In a way, the debate has been in two halves: part of it was about my speech on clause stand part, and that was followed by a fascinating series of speeches primarily about how we can better incentivise microgeneration. That has been the essence of the debate, and I shall start by responding to some of the issues raised by the hon. Member for Wealden.

By way of context, I agree entirely with my hon. Friend the Member for Southampton, Test, who indicated that we need to understand the recent history of different countries with regard to renewables. Our country’s recent energy history needs to be understood partly in the context of the huge energy resource in the North sea and the wider UK continental shelf. Unlike other countries, we have had an abundant resource of fossil fuels. We took the decision shortly after the second world war to build civil nuclear reactors, whereas other countries—understandably, because it is up to member states—are opposed to nuclear.

It is fair to point out, as Liberal Members have done, that some countries are rich in hydro resources because of their terrain. I sometimes think that those who make too glib a comparison with Europe—no one here has done so today—do not take hydro into account. It is a significant percentage of European renewable resources, and it is only fair to point that out.

Having admitted that the UK has come relatively late to renewables, we have not come late to CO2 and greenhouse gases. We are one of the few member states that will hit the 2012 Kyoto protocol target. Greenhouse gas and CO2 emissions reduction are the primary objectives for tackling climate change, and I sometimes think that when talking about nuclear, energy efficiency or renewables, we should keep our eye on the ball: the threat to our planet from global warming. We must approach that task in a number of ways, of which the renewables strategy is a key component, but not the only one.

We have heard some comparisons with Germany today, and I want to give some data on Germany in terms of feed-in tariffs. But it is worth bearing in mind—we like to beat ourselves around the head a bit in the House—that the UK’s CO2 emissions per capita are lower than Germany’s.

Charles Hendry (Conservative, Wealden)

Will the Minister confirm that two of the main reasons that we have been able to meet those Kyoto targets are first, the dash for gas, because we invested in gas in a way that other countries did not, and secondly, the loss of the United Kingdom’s manufacturing industry, which has been exported to China? China and other countries in Asia now produce the CO2 that those businesses historically produced, but above all, the dash for gas was responsible.

Malcolm Wicks (Labour, Croydon North)

Yes, that is a very substantial component, and the hon. Gentleman is right to remind us that when examining a nation’s carbon dioxide emissions, the balance between traditional manufacturing and the development of service sectors is important. That was a useful intervention—as ever. There may be a deterioration in the future, but currently, the quality is extremely high.

May I say something about the Government’s renewables strategy? I shall say it briefly, because we must understand the issue in two parts. Current Government policy will, by 2010, already deliver about £1 billion of resource to the renewables sector per annum through the renewables obligation. So, when some say that we should spend more, let us bear that figure in mind: by 2010, as I understand it, £1 billion will be spent per annum through the RO. We are providing other grants and so on, too, so it is already a substantial resource.

Our White Paper set out ambitious measures to increase renewable energy production in the UK from 2 per cent. of all energy, which is more or less the figure now, to some 5 per cent. by 2020. However, we know that we need to do much more in the light of the challenge posed by the European Union’s target of 20 per cent. for the whole European Union by 2020. We expect the amount of electricity that we produce from renewable sources to triple to about 14 per cent. by 2015 when compared with now. On electricity, we currently produce about 4 or 5 per cent., and we expect the figure to triple by 2015.

My main point is that we now recognise that we must do far more if we are to meet our share of the European Union’s 2020 target. The Commission said that our target should be 15 per cent.; I am sure that it will be there or thereabouts, but we are discussing the fine detail. It will be a very substantial effort, and current policies alone will not, in any way, enable us to hit that target, whatever it turns out to be.

We are therefore thinking again and hard about a renewables energy strategy. We will consult on it and publish a document in the summer to develop a strategy that will get us to whatever our target turns out to be. It will be very substantial. We have a raft of successful policies that are moving us ahead, but are they enough? No, they are not. Do we need to do more and do we need a new strategy? Yes, we do. In simple terms, that is our current position.

Anne Main (Conservative, St Albans)

I congratulate the Minister on his forceful support for renewables. There is in my constituency a renewable energy station at junction 20 of the M25, and I should like to welcome him there to see some of the groundbreaking work that it staff are doing. I hope that he will accept that invitation to see what can move us forward with extra renewable impetus.

Malcolm Wicks (Labour, Croydon North)

I am very happy to accept that invitation. It would be wonderful to go there next Thursday afternoon, but unfortunately there are more theoretical issues to deal with.

Charles Hendry (Conservative, Wealden)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

Yes, of course—another invitation!

Charles Hendry (Conservative, Wealden)

The Minister is always welcome to my constituency; I am not sure, after my earlier comments, whether I would always be welcome to go to his. On the size of the challenge, if 40 per cent. of our electricity will have to come from renewables to meet the EU target, does he agree that that equates to 25 GW, or thereabouts, of available peak demand, which will have to come from renewables? Does he agree that that is the size of the challenge?

Malcolm Wicks (Labour, Croydon North)

I certainly recognise, given that it is easier at the moment to produce renewable energy for electricity than for some other things, that the proportion of our electricity coming from renewables—I have heard figures of 35 or 40 per cent., perhaps more—will be colossal. As we develop our renewable energy strategy, we will look at the numbers and the implications very carefully and I think it is best to leave it there.

The hon. Gentleman asked me about proposed section 32A(4) and the implications for the UK. As he knows, there are already three separate renewable obligations: one for England and Wales, one for Scotland and one for Northern Ireland and these are co-ordinated for maximum efficiency and we want this to continue. Certainly industry wants this consistency and this certainty. If, however, devolved Administrations decide to open up differences in banding, this power allows us to make sure it does not disrupt the other obligations, but we are working very closely with the devolved Administrations to ensure that our united approach continues, which, I repeat, is what the industry is asking of us.

The hon. Member for Wealden, who was the only person in this room who was disappointed by the shortness of my speech the other day and who obviously went to a very good school because he understands the alphabet pretty clearly, asked me about the proposed section 32M which touches on fossil fuels. I think I need to give him a detailed explanation. This section defines some of the terms we have already discussed and allows the Secretary of State to set out in the order the definition of what constitutes waste for the purposes of the RO and how the proportion of fossil fuel in the waste is to be determined. The provision enables waste, which has a relatively high proportion of plant and animal matter, and—this is the crucial point— some fossil fuel content to be treated as a renewable resource, for example crop residue left over after a production process that contains some fossil fuel contaminants. This type of waste is typically referred to as biomass. As well as waste that can be treated as biomass, the RO also supports the electricity generated from the non-fossil fuel content of waste when used in combined heat and power stations, or when converted to a fuel by anaerobic digestion, gasification or in other ways.

This new section will enable the order to make provision as to what may be accepted as sufficient evidence of the proportion of fossil fuel content of waste in these circumstances, which could include the use of declarations by generators. This is intended to overcome difficulties that operators face in the accurate and cost-effective measurement of the fossil fuel content of mixed wastes. To avoid the risk of inaccurate calculations, this section also includes a provision enabling the regulator, Ofgem, to require sampling of fuels in specified situations to ensure that ROCs are awarded only for genuine renewable generation.

The hon. Member for Wealden also asked about proposed section 32B(3)(b) in terms of the implications if some renewable electricity is exported. The amount of electricity exported is a very small proportion of the whole, but as long as generators can sell to suppliers in the UK, they will be able to claim ROCs should some of that electricity be exported. That is the only sensible way to proceed.

The hon. Member for East Devon asked about Scotland. Decisions on banding in Scotland have not been made and it is not the case that marine there gets five ROCs. There is currently additional support for marine through the marine supply obligation in Scotland. However, this is currently set at zero. We are working with the Scottish Executive to ensure a UK-wide banded RO system, and this is really what the industry and what generators want.

The hon. Member for Cheltenham referred to a technical, arithmetical matter about the fall in the rate of compliance for RO—

Joan Humble (Labour, Blackpool North and Fleetwood)

I remind the Committee that with this we are taking the following: New clause 6—Feed-in tariffs—

‘(1) The Secretary of State may by regulations make provision to introduce feed-in tariffs for renewable micro-generation and decentralised energy.

(2) In this section—

“feed-in tariffs” means a requirement on utilities to buy electricity from renewable sources at a feed-in rate to be set by the Secretary of State, dependent on available renewable technology;

“micro-generation” means any generation under 250kW;

“renewable energy” means any form of energy produced in the generation stage without using fossil fuels or emitting carbon;

“a feed-in rate” means a guaranteed payment by the energy suppliers for each kilowatt of electricity generated.’.

New clause 8—Feed-in tariffs (No. 2)—

‘(1) The Secretary of State may make regulations for the purposes of requiring designated electricity suppliers to purchase the electricity generated from renewable sources by small-scale generators (“feed-in tariffs”).

(2) For the purposes of subsection (1)—

(a) “small-scale generators” are persons generating electricity below a level to be determined by the Secretary of State following consultation,

(b) “renewable sources” are such energy sources as may be determined by the Secretary of State following consultation,

(c) “designated electricity suppliers” are those persons licensed by the Secretary of State to supply electricity as set out in section 6 of the Electricity Act 1989.

(3) The Secretary of State must consult for the purposes of determining the appropriate form of regulations as set out in subsection (5) below and must—

(a) commence such consultation within a period of six months of the day on which this Act is passed,

(b) determine a reasonable period of consultation,

(c) consult with—

(i) designated electricity suppliers,

(ii) the National Consumer Council (incorporating energywatch),

(iii) the Gas and Electricity Markets Authority (“GEMA”),

(iv) the National Grid,

(v) such generators of electricity from renewable sources as he considers appropriate,

(vi) such environmental organisations as he considers appropriate, and

(vii) such other persons as he considers appropriate.

(4) The Secretary of State shall, within six months after the end of such consultation, make regulations for the purpose of bringing into effect feed-in tariffs pursuant to subsection (1), in such manner as the Secretary of State shall consider appropriate.

(5) The regulations mentioned in subsection (4) above must—

(a) define the renewable sources in respect of which feed-in tariffs shall apply,

(b) define the maximum level of electricity generation in respect of which feed-in tariffs shall be available, as referred to in subsection (2)(a) above,

(c) define which persons generating electricity from renewable sources shall be eligible for feed-in tariffs,

(d) prescribe the means by which tariffs applicable under feed-in tariffs are to be calculated and, where necessary, amended,

(e) prescribe, where appropriate, the terms and duration of the feed-in tariff arrangements,

(f) make provision for the payment and incidence of the costs of connection of relevant small-scale generators to the National Grid,

(g) make provision for the regulation of feed-in tariff arrangements by a designated body,

(h) make provision for the Secretary of State to report periodically on the effectiveness of the regulations made under subsection (1) in achieving their objectives,

(i) provide for the making of any necessary amendments to distribution licences or supply licences held by any person, and

(j) make such changes as may be necessary to existing legislation, including that providing for the Renewables Obligation Order.’.

New clause 14—Tariffs for renewable energy—

‘(1) The Secretary of State may by order impose on each energy supplier falling within a specified description (a “designated energy supplier”) an obligation to reimburse producers of renewable energy falling within a specified description (a “renewable energy producer”) for each unit of renewable energy produced as set out in subsection (4) (and that reimbursement rate is referred to in this section as a “renewable energy tariff”).

(2) The descriptions of energy supplier upon which an order may impose the renewable energy tariff are those supplying electricity or gas—

(a) in Great Britain;

(b) in England and Wales; or

(c) in Scotland,

excluding such categories of supplier as are specified.

(3) In this section—

“renewable source” has the same meaning as in the Utilities Act 2000 (c. 27);

“renewable energy” means energy from renewable sources;

“renewables obligation” means the obligation specified in section 32 of the Electricity Act 1989 (c. 29);

“specified” means specified in the order.

(4) The renewable energy tariff shall set the reimbursement level for each kilowatt hour of energy produced by the renewable source and may—

(a) be set at different levels for different types of renewable source,

(b) be varied at different times as prescribed in the order or in successive orders.

(5) The order shall set out—

(a) the renewable sources in respect of which renewable energy tariffs shall apply,

(b) the tariff applicable to each renewable source,

(c) which installations shall be eligible for renewable energy tariffs, and any provisions to exclude installations accredited under the renewables obligation,

(d) which renewable energy producer shall be eligible to receive renewable energy tariffs,

(e) which designated energy supplier shall be responsible for paying the renewable energy tariff to a particular renewable energy producer,

(f) the terms and duration of the renewable energy tariff arrangements,

(g) how the amount of energy produced and upon which the renewable energy tariff is payable shall be measured, determined or deemed,

(h) provisions for the regulation of renewable energy tariff arrangements by a designated body,

(i) provision for the Secretary of State to report periodically on the effectiveness of the regulations made hereunder,

(j) any necessary amendment to distribution licences or supply licences held by any person, and

(k) such other provisions as may be required for the efficient and cost-effective operation of the renewable energy tariff.

(6) Before making an order, the Secretary of State must consult—

(a) the Authority,

(b) the energy suppliers to whom the proposed order would apply,

(c) representatives of renewable energy producers to whom the proposed order would apply, and

(d) any other persons he considers appropriate.

(7) An order under this section shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.’.

Malcolm Wicks (Labour, Croydon North)

Welcome to the Chair, Mrs. Humble. I was addressing a question from the hon. Member for Cheltenham. The rate of compliance for the renewables obligation between 2005-06 and 2006-07 raised a query in his mind about the delivery of less generation. However, that is a technical one-off effect of the tightening of the cap on co-firing. It will be rectified by the reforms that we propose to introduce through the Bill. We are making the RO more efficient and effective, thereby driving faster and wider deployment. If he would like a more technical explanation, I am happy to give him one in writing if that would be appropriate.

Martin Horwood (Liberal Democrat, Cheltenham)

I am grateful for the Minister’s response. I was not aware of that effect. If it is the true explanation for the shortfall this year and it is a one-off effect, that is encouraging, but I would not mind, as well as the technical explanation that he has promised me, an analysis of the percentages over the past five years or for as long as the renewables obligation has been in existence, so that we can establish whether there is a trend.

Malcolm Wicks (Labour, Croydon North)

I wonder whether one issue in the hon. Gentleman’s mind is that there is something known as headroom in the renewables obligation, so we are always setting a percentage figure somewhat higher than where we actually are. That is how we incentivise people to come forward with investment, but I am happy to supply any other information that I can to the hon. Gentleman.

The hon. Member for Northavon, who is not here this afternoon, referred to “Rock Around the Clock”—I think that we have had the last of those jokes now. He was the second speaker on the Liberal Benches this morning, so he was very much the Comets to the hon. Member for Cheltenham’s Bill Haley.

The hon. Member for Northavon asked what the criteria were for establishing the bands. Bands were set on the basis of criteria in proposed new section 32D(4) of the Electricity Act 1989. In particular, the cost data came from a study by Ernst and Young, but we also took into account other criteria, including the cost to consumers. We have also paid heed to the results of our recent consultations on proposals, which supported a limited number of bands. Consultation has led to some minor changes to the bands to which he referred.

Martin Horwood (Liberal Democrat, Cheltenham)

I am sure that my hon. Friend the Member for Northavon, who apologises for not being present this afternoon, will be grateful for the information that the Minister has given, and I am sure that the consultation was right about having a relatively simple framework of bands. That is obviously desirable, but is the study by Ernst and Young in the public domain? If so, can it be supplied to all members of the Committee?

Malcolm Wicks (Labour, Croydon North)

I am advised that the study is in the public domain. I will ensure that, in the most practical way, it is available to members of the Committee.

The hon. Member for Northavon also asked whether a European super-grid was a good idea. Given the development of offshore wind in a number of member states and the European target for 20 per cent. of all our energy to come from renewables by 2020, a super-grid is an interesting long-term idea. Obviously, it raises a range of regulatory and other issues. I have personally discussed those ideas with Mr. Adamowitsch, who is the EU offshore wind co-ordinator. I can see why the hon. Gentleman might smile at the idea of Brussels having such a co-ordinator, but Mr. Adamowitsch is a distinguished former Energy Minister from Germany. He visited the UK last year and we discussed those matters.

The purpose of the offshore transmission regime, which we will discuss next, is to enable transmission of the significant amounts of electricity generated from offshore renewables in offshore waters—offshore wind, but potentially also wave and tidal—to the Great Britain grid, to meet our renewable energy targets.

Charles Hendry (Conservative, Wealden)

I am fascinated by the mention of Mr. Adamowitsch. Only the Germans could try to co-ordinate wind; it is a fascinating challenge. Will the Minister clarify how the super-grid will be considered? If the area where the wind energy was generated was part of British territorial waters, but the energy happened to be used in Denmark or Holland, for example, would it count as part of their renewable quota or as part of our renewable commitment?

Malcolm Wicks (Labour, Croydon North)

I cannot give a definitive answer, as this is just a pipe dream at the moment—or a wind dream. No doubt, those questions would have to be considered. At present, there is debate about what counts towards hitting the 2020 European target. I hope that if there was a super-grid, which would no doubt sometimes be sending electricity one way and sometimes another way, we would come to some sensible arrangement about how it was chalked against the different national targets. I assume, although I do not want to suggest that this is the definitive answer, that if electricity came from a wind farm in British territorial waters it would count against our own target, but it is too early to make a judgment about that.

Stephen Ladyman (Labour, South Thanet)

I do not know whether the Minister has the answer to this question—

Malcolm Wicks (Labour, Croydon North)

Do not ask then.

Stephen Ladyman (Labour, South Thanet)

This discussion has brought to my mind the fact that my constituency is largely powered by French electricity because we buy it from French generators. How do they take account of energy that they produce renewably and sell to us in south-east England?

Malcolm Wicks (Labour, Croydon North)

That question illustrates the complexity of the issue and I am grateful to my hon. Friend.

As an aside, from time to time I take refuge on the island of Alderney, one of the Channel Islands. My wife is a native of the island, which has ambitious plans for tidal power. My way of relaxing away from the UK is to discuss tidal power with the people of Alderney. I mention that because of another little complexity: as every schoolgirl knows, the Channel Islands are not part of the United Kingdom and are actually not part of the European Union.

Stephen Ladyman (Labour, South Thanet)

Will my hon. Friend give way?

Malcolm Wicks (Labour, Croydon North)

Of course. I am not very good on the Isle of Man, so please do not ask about that.

Stephen Ladyman (Labour, South Thanet)

I cannot help but point out to the Committee that I have seen a photograph of my hon. Friend in the Minister’s office in Alderney. They were old school friends and the Minister was in short trousers in the photograph.

Hugo Swire (Conservative, East Devon)

I, too, pay tribute to Alderney. I have been to Fort Clonque, an excellent place where I ran into Duncan Goodhew, the swimmer, at the airport—he must know a lot about wave power.

Malcolm Wicks (Labour, Croydon North)

Absolutely.

Joan Humble (Labour, Blackpool North and Fleetwood)

Order. We have had enough of Alderney now.

Malcolm Wicks (Labour, Croydon North)

For the record, I was in my short trousers when I was the school’s 100 yards champion; it was not during a later period.

Charles Hendry (Conservative, Wealden)

I am not interested in swapping holiday stories with the Minister, but I am interested in whether he can give us some more clarity about the exporting issue. When we discussed it this morning, he said in relation to renewables obligation certificates that if the energy was generated in the UK and sold to a company in the UK, it could be exported through the interconnector to France or wherever. Through the super-grid that would not necessarily be possible, because it would be sold directly from the super-grid to a country abroad. I realise that he may not have the answer now, but I know that he is promising to send me a tome, or a long letter, so perhaps the information could be included. In the responses we have had from the Minister there is a lack of clarity about how the process would work.

Malcolm Wicks (Labour, Croydon North)

To be fair, electricity from various sources will go into the grid, and some may then go to another country, but we cannot colour the electricity from renewables green and trace it. We certainly need to work through the issues that the hon. Gentleman raises, but we cannot track renewable electricity electrons through the system, which is why we have renewables obligation certificates to help track renewable electricity. We should not get too insular about it, however, because we are signed up to a Europe-wide target. At the end of the day, the objective is that Europe should hit its renewables target, and we no doubt need to work together in all sorts of ways to achieve that.

We have three new clauses before us, which have been moved by Labour Members, Liberal Democrat Members and Conservative Members respectively. Although they all focus on renewables, they focus particularly on microgeneration and the virtues of a feed-in tariff system, and I shall now address those issues.

In the context of the EU 2020 renewable energy target, the issue of how we increase the deployment of renewable energy has become ever more urgent, as these debates have shown. We certainly recognise that the issue represents a major challenge, and work has already begun to identify the actions and measures that will help us to achieve our share of the EU target. There is no doubt that we will need significant deployment of different renewables and generating stations of all sizes, from large offshore wind farms, such as the future London Array, which we expect to be the world’s largest wind farm, at 1 GW, to smaller, local generation, which can be below 10 kW.

New clause 14 would introduce a feed-in tariff for all sizes of energy generation. Feed-in tariffs are sometimes presented as a kind of magic bullet that will solve the real or imagined problems of the renewables industry. I do not believe that is true, and accepting the new clause at such a crucial point in the development of the renewables obligation would send entirely the wrong message to industry. It could damage investor confidence and result in significant delay to projects coming online.

Throughout the debate about the rights and wrongs of any support mechanism, we must not overlook the success of the renewables obligation so far. Renewable generation has almost trebled since its introduction in 2002, and the reforms in the Bill will triple it again by 2015. However, the delivery of more capacity is not simply a matter of the financial support mechanism; a broad range of factors is at play—not least the planning system—and we are working hard to address them all.

We must also be careful when making comparisons with other countries. Most continental feed-in tariffs operate on the basis that there is a vertically integrated network operator that can be obliged to offer a tariff. That, of course, is not the case in the UK, where suppliers are separate from the network operators. That separation allows suppliers to choose where they buy their energy, which in turn drives efficiency and innovation. That does not fit well with a more rigid system in which the Government, in essence, fix the price. Simply imposing on suppliers an obligation to pay a tariff will not guarantee that we have an effective support mechanism for the UK market.

People sometimes talk about feed-in tariffs as though they were cost-free, but that is simply not the case. As with any support system, there are cost implications. In 2007, the International Energy Agency published estimates for Germany. Between 2000 and 2012, the German feed-in tariff regime will result in payments of €68 billion, of which between €30 billion and €36 billion will be the additional costs of renewables. By 2012, the annual cost will be between €8 billion and €9.5 billion. Solar photovoltaics will provide 4.5 per cent. of Germany’s renewable electricity, while taking 20 per cent. of total payments. Those important figures should enter our debate, which is why I asked the hon. Member for Cheltenham whether he had any financial information for us. Such things need to be factored in.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister raises important questions about public practice and how the system would work in a liberalised energy market such as we have. They are perfectly fair points. However, none of the new clauses oblige the Government to replace the renewables obligation wholesale with a feed-in tariff system tomorrow. The kind of costs he mentioned for the established system in Germany—a rather larger country—do not apply in this case. This is about enabling powers to allow him, through two of the new clauses, to introduce feed-in tariffs aimed at decentralised energy and microgeneration initially on a much more modest scale and cost to the public finances. He is being a little unfair in citing those numbers.

Malcolm Wicks (Labour, Croydon North)

Of course, I am coming to that. I make those points because part of the naivety of the debate—not necessarily in Committee but generally— somehow suggests, “Britain bad, Germany good: good old feed-in tariffs”. However, everyone would recognise that the costs that I have cited are very considerable.

Part of the debate about energy policy in Britain is to inform the public and ourselves that, at a time of rising global energy prices, we are now, perfectly properly, adding to those prices because of the environmental measures that we take. That could be at European level through the emissions trading scheme or through renewables obligations and so on. We must look at the price impact on the customer—something that is often not done during the debate. A feed-in tariff regime underestimates the costs of renewables. Unlike the RO, a feed-in tariff regime covers only the costs of the generator and it imposes other costs on the electricity supply chain—for the use of a network, for example, and for balancing the variable nature of some renewable generation. Those become hidden subsidies in the feed-in tariff regime, which will be passed through to consumers. The RO allows the market to take account of those costs in contracting with renewables generators.

New clause 14 does not, on my understanding, remove the RO. It seems to envisage a situation in which the RO continues to run alongside a new regime. Before we decide to introduce any additional incentives for renewables, we must carefully consider how those schemes would interact. That will be a key element of our analysis in developing a strategy for the EU 2020 target. However, it is by no means a given that a Government-set tariff is the best approach. For example, people often claim that a feed-in tariff provides a more predictable support mechanism. We understand that the German Government recently announced that they would be reducing the level of the feed-in tariff for solar photovoltaics in Germany by around £120 per megawatt-hour. That was after the subsidy had already been reduced by around 50 per cent. over the past 10 years.

Martin Horwood (Liberal Democrat, Cheltenham)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

I shall give way on the issue of consistency.

Martin Horwood (Liberal Democrat, Cheltenham)

No, on the specific issue of the adjustments to the German system. On further investigation, the Minister might find that those changes were grandfathered so that new entrants were earning the lower rate of the feed-in tariff. More importantly, they are a measure of the success of the German photovoltaic industry because they reflect a lesser need to subsidise the expanding and successful solar industry. Therefore, they are a measure of the success of feed-in tariffs, not a weakness.

Malcolm Wicks (Labour, Croydon North)

I was addressing the issue of consistency. Going forward, it is good to be as specific as possible, so that new investors can do their arithmetic properly for the investment.

Many of the arguments for why we should not introduce a feed-in tariff in the Bill also apply to new clauses 6 and 8. I will not reiterate the points, but since the new clauses are more specific and seek a power permitting the introduction of a feed-in tariff for microgeneration and decentralised energy, I hope that the Committee will bear with me if I make two additional points.

First, we are clear that microgeneration has an important role to play in our renewable energy mix. That is clear from what I have already said. Our commitment is proven by the focus and support that the Government have given to microgeneration. In 2006, we saw our first-ever published microgeneration strategy. We have made £86 million available in capital grants in the low-carbon building programme to reduce the cost of buying and installing equipment. We have provided independent certification of products and services, and a route for complaints with the microgeneration certification scheme. This spring, we shall remove the need for planning permission for most domestic installations that have little or no impact beyond the host property. My hon. Friend the Member for Southampton, Test focused, in part, on that in his speech.

That is not all. Proposals in the Bill will enable the Secretary of State through the order to allow microgenerators to double the number of ROCs that they can receive at present. That is a significant advance. We have already taken steps to simplify the process for microgenerators under the RO, including allowing them to make annual claims for ROCs and simplifying the accreditation forms. We shall continue to simplify the access of microgenerators to, and benefit from, the RO.

Since the most recent changes that we made last April, the number of microgenerators accredited under the RO has increased by 250 per cent. For example, I am especially pleased that Ofgem will shortly be making an online accreditation system available that will make accreditation to the RO easier. The significant amount that the Government have already done, or have in train, demonstrates our commitment to the growth of microgeneration.

My second point, however, is that, although we remain convinced of the benefits of microgeneration and its potential role, against the background of rising energy prices and the inevitably constrained resources available in the economy to tackle climate change, we are also conscious of the fact that microgeneration is more expensive than a number of other large-scale forms of renewables. That is inevitable, given the state of that technology. Therefore, any decision that we take in the context of further support for microgeneration needs to be balanced carefully against whether additional resources might be more cost-effectively targeted at other forms of renewables. Such options could include renewable heat, which can be cost-effective for households that are not connected to the gas grid. Members of the Committee might like to note that most of the estimated 100,000 microgenerators in the United Kingdom are reusing renewable heat technologies.

For all those reasons, when giving evidence to the Committee on Tuesday 19 February, which I think was last week—

Charles Hendry (Conservative, Wealden)

It seems a long time ago—

Malcolm Wicks (Labour, Croydon North)

Indeed. I was grateful for the opportunity to announce that, as part of the renewal energy strategy consultation that my Department will conduct in the summer, we will include consideration of the role of microgeneration and distributed energy going forward. That will include looking at other support options, such as feed-in tariffs. All those arguments strengthen my view that it is premature to amend the Bill with the powers under the new clauses in advance of the work on the renewable energy strategy and the consultation in the summer. It is not until we have completed that work that we should consider whether additional legislation is necessary and, if so, of what type.

I reiterate my support for microgeneration, notwithstanding some of the issues that I have raised, not least because it enables the citizen to take action against global warming. We often debate climate change and renewables in terms of big institutions, such as Ofgem, the European Union and member states, and talk about big programmes, but there is growing concern among most of our citizens that we are part of the problem of CO2 emissions in respect of our dwellings. More and more constituents want to become part of the solution. There are different ways in which they can do that, but one is if we can facilitate the development of microgeneration.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister’s remarks were perhaps influenced by a traditional civil service approach, but he was rather like a man building a monumental castle with lots of ramparts in defence of current policy and then opening a little back door to enable us to discuss feed-in tariffs during the consultation in the summer. Having said that, it is very welcome that the Government are to include feed-in tariffs in that consultation. I would like to put on record my appreciation to the Minister for that concession.

Charles Hendry (Conservative, Wealden)

I join the hon. Member for Cheltenham in saying we are pleased that the Minister is to consult formally on this issue, but that has to be tinged with disappointment that he is not prepared to go further.

In particular, new clause 6 simply gives the Secretary of State a power to introduce feed-in tariffs at some time in the future. It does not require him to do so; it does not specify how. Looking at the time scale, the consultation process will start later in the year. One assumes that will run for some months and that there will be a further few months while the responses are evaluated before the Minister comes back to the House to give a statement. If at that point—we are looking at the middle of next year—the Government decide that feed-in tariffs are the right way forward, we then have to find a slot in the legislation programme, presumably in the following Session. So realistically we are looking at two years before feed-in tariffs could be on the statute book. That is an appallingly unsatisfactory delay.

If the Government are to decide relatively soon following this consultation process to go down the route of feed-in tariffs—and I hope they do, especially for microgeneration—it would make sense to have the enabling clause in this Bill so that they can immediately lay the measures for how they are going to do that before Parliament in secondary legislation. This is an opportunity to take a year of delay out of that process.

Many of the contributions we have had have emphasised that time is not on our side. We know we are lagging behind others in microgeneration. All of us, I believe, want to see a step change in the approach we are taking towards that. Indeed, we put forward a document just before Christmas on microgeneration—I imagine it was on the Minister’s wife’s Christmas list for him to read while they were in the Channel Islands. We talk about how one makes every home a generator; how one encourages more people to go down the route of photovoltaics; how one stimulates an incredible change in the culture of this country towards electricity generation.

At the moment, there is enormous enthusiasm but confusion among the public. They want to do more but they do not know how to. The ROC system is part of that confusion. Feed-in tariffs would give much greater clarity, certainty and predictability. We have not had a single witness who did not agree with that—apart from the Minister himself. Every other person, in their written and oral submissions, said that they support the inclusion of feed-in tariffs in the Bill. All we are looking for is the capability to introduce this through secondary legislation in a shorter time scale than would be required if we had to go again through the whole process of primary legislation. We waited a long time for this energy Bill and it would be very unfortunate if the Government passed over this opportunity.

Malcolm Wicks (Labour, Croydon North)

I was just thinking whether we had waited a long time for the Energy Bill. I do not think we should apologise for the fact that we have looked at energy strategy most carefully. We had the energy review, which I led for the then Prime Minister. We then consulted and had an energy White Paper. These are quite complex issues.

I would be loth to support any new clause that did not put us in the right place. I have said that I am open to the argument. In terms of incentives for microgenerators—both the householder and perhaps the management committee of the small community building, the church hall or whatever—we are not necessarily in the right place. I have acknowledged that. I have detailed the things we have done and I think we have done them quite well. We are not in the right place and I want to see how we can get there. We are going to do that through our strategy review.

If we legislate now, we could get to the wrong place. I said earlier that we would look at feed-in tariffs but we will also look at other mechanisms. There should be no theology about this. How do we enable and facilitate microgeneration? That is the issue. I would be reluctant to support a new clause now that might not be right. Through our renewable energy strategy, which is looking at the whole of renewables—the macro as well as the micro—we can work out whether we need to do more, what the best mechanism is and how we should proceed then.

Jamie Reed (Labour, Copeland)

Energy policy cannot exist in a bubble or in a vacuum. We are now discussing energy policy in the context of climate change and security of supply, but we also need to discuss it in the context of its social consequences and impacts, not least energy costs to the consumer. The witnesses we heard during our evidence sessions were asked, by me and I am sure by other Members on a number of occasions, what they believed the consequences of feed-in tariffs would be on what one might ordinarily describe as working class people. They were asked if this issue was a middle class obsession and if they had concerns about the effects of feed-in tariffs upon energy consumers at the poorer end of the social strata. Before the Minister finishes his speech, can he address that issue because we do not exactly know the answers? That is another good reason for us not rushing headlong into the feed-in tariff culture, as proposed in the new clauses here today.

Malcolm Wicks (Labour, Croydon North)

My hon. Friend has raised a good point. I have said that I am always concerned when we have systems that mean the poor pay more for energy, albeit inadvertently, and that is true for food as well in many respects. Better-off people with bank accounts and credit can often pay less for energy. When we move forward with a potential support system, we have to be careful that we are mindful of the factors that my hon. Friend raises. I am bound to say that, in my Department, we are considering how we can bring the worlds of microgeneration and our concerns about fuel poverty together. That is a Department for Environment, Food and Rural Affairs responsibility, but we developed the energy efficiency commitment into what will now be called CERT—the carbon emissions reduction target—and it will now include a microgeneration element. At the moment, I am looking to see whether we might do more through our low-carbon building programme to tackle fuel poverty. That is sensible and it addresses the socio-economic issues that my hon. Friend raises. If we can use new technologies to tackle old social evils such as fuel poverty, we begin to get to the right place.

Charles Hendry (Conservative, Wealden)

The exchange that we have just witnessed is interesting. It is unfortunate for many of us that the Bill will not give us the opportunity to talk about fuel poverty. Indeed, the amendments that Conservative Members have tabled on fuel poverty and those on social tariffs by Labour Members have been ruled out of order because of the way that the Bill has been defined. That is unfortunate. Will the Minister agree to see whether he can come back on Report with a clause that would try to achieve what we are seeking? In other words, that is a clause that would create a permissive environment so that he could introduce feed-in tariffs through secondary legislation at an early stage. If it was deemed, as a result of the consultation process, that that was the right way forward, the tariffs could be brought in earlier than if they had to go through primary legislation.

Malcolm Wicks (Labour, Croydon North)

I will certainly promise to think again about that. I will not go as far as the hon. Gentleman is tempting me to go, for the reasons that I have established about our need to develop a sensible strategy. It is too soon to say whether other recommendations in that strategy will require future legislation, but I suppose that it is possible. There could therefore be future legislative opportunities. For the reasons that I have indicated, I do not think that I can concede that point to him at the moment.

The points that my hon. Friend the Member for Copeland introduced about the cost implications for different social groups are very important. The evidence that I was able to produce from the costs in Germany is important, although the hon. Member for Cheltenham intervened, I think helpfully, on that. I have figures that photovoltaic systems cost around 30p per kW hour at present, against between 6p and 7p an hour for large scale onshore wind. We must be mindful of those things, in relation to various developments and the way in which we support what are inevitably, at the moment, rather expensive technologies.

Martin Horwood (Liberal Democrat, Cheltenham)

I share the frustration of the hon. Member for Wealden about the potential critical delay in the introduction of measures that might come out of the promised consultation. I want to be helpful; would it be possible for the Minister’s advisers to produce an opinion, by the time we next meet, on whether the introduction of any kind of feed-in tariff system would be legally possible as a result of the consultation, without further primary legislation, or whether there is, as Opposition Members feel there is, a question of a requirement for yet more primary legislation and delays? After all, we have had endless energy reviews and Select Committee reports on renewable energy.

Malcolm Wicks (Labour, Croydon North)

Without promising too much, I have said that I shall reflect on the issues. I emphasise, however, that I have not committed us to introducing a feed-in tariff for microgeneration; I have said that it will be among the options that we shall consider. It would be foolish for us to get enthusiastic about one mechanism when there might be others, which could be more cost effective, to consider.

Charles Hendry (Conservative, Wealden)

I shall not prolong the debate, but I am profoundly disappointed—given that there is cross-party support for the measure, and overwhelming support within the industry and environmental and consumer groups for going down route—that the Minister has taken such a hard stance against it. I hope that he will reflect on that subsequently and decide whether he can do something on Report that will respond to some of the relevant concerns.

Malcolm Wicks (Labour, Croydon North)

Has the hon. Gentleman costed his proposals? He is being quite tough with me about that; presumably he has costed the implications of the new clause.

Charles Hendry (Conservative, Wealden)

Yes, absolutely. I am sure that the Minister read the pamphlet that I referred to, which discussed how the proposal would be paid for. It would be paid for out of the auctioning of the EU emissions trading scheme. That would provide a phenomenal amount of money, which the Government could use to pay for feed-in tariffs. It would not require any taxation increases or charges elsewhere. A sum of money exists that has not yet been allocated, so it cannot be a spending commitment that the Chancellor would want to take into account in trying to hold us to account.

Malcolm Wicks (Labour, Croydon North)

Has the shadow Chancellor agreed to such hypothecation?

Charles Hendry (Conservative, Wealden)

Yes, of course he has. I would not have said it otherwise. It is made clear in the policy paper, and in the speech given by my right hon. Friend the Member for Witney (Mr. Cameron) at the beginning of December to explain exactly how we would pay for the relevant measures. We aspire to Government and we are not giving uncosted commitments or making announcements without explaining how we are prepared to pay for them.

Jamie Reed (Labour, Copeland)

Will the hon. Gentleman give way?

Charles Hendry (Conservative, Wealden)

I can see trouble.

Jamie Reed (Labour, Copeland)

The hon. Gentleman does me a disservice.

On the funding point, is the hon. Gentleman confident that his proposal will have no negative effect at all on those poorer people who struggle with their energy costs and for whom, frankly, the feed-in tariff is an irrelevance?

Charles Hendry (Conservative, Wealden)

The hon. Gentleman’s second point is wrong; but to deal first with his first point, going down the route of renewable energy will push up costs. Typically, of a £1,000 bill at the moment £80—8 per cent.—is related to the EU emissions trading scheme, the carbon emissions reduction target and other charges in relation to renewables policy. The consumer is already paying more for that element, and one expects the cost to rise over time. However, that does not mean that one should not be looking at doing more to get energy from renewables.

There is a separate issue, however, which is what the Government feel they should be doing about fuel poverty, and measures such as the winter fuel allowance and trying to ensure that the people most likely to be in fuel poverty have the means to pay the bills. One issue is an energy policy issue and one is a benefits policy issue. Clearly they are both issues for the Government, but one should not damn the desire to move towards renewables because of concern that there will be costs that will not be covered elsewhere. There is a responsibility to cover those costs somewhere else.

The answer to the second point is that we do not see any reason why people in fuel poverty could not benefit from microgeneration. If a large block of social housing had on its roof photovoltaic cells, providing electricity for the people who lived in those properties, and a wind turbine next to it, not only could they get their electricity from a wonderfully green source, but there would be scope for putting the excess—over and above that which they need—back into the grid and they could then derive an income from it.

Martin Horwood (Liberal Democrat, Cheltenham)

rose—

Charles Hendry (Conservative, Wealden)

One should not see microgeneration as the preserve of the rich with large estates where they can put up wind turbines. We have a much greater vision, and throughout the country, people should be encouraged to take that approach. That is what is so exciting about it.

Martin Horwood (Liberal Democrat, Cheltenham)

The hon. Gentleman was right to hold me off from intervening, because he has just made the very point that I was going to make. There is a potentially important community benefit, and small scale microgeneration can deliver not only revenue to communities from the sale of electricity, but reduced fuel bills. The Carbon Trust is already developing an important precedent for it in the partnership for renewables initiative, which exactly illustrates the point that he very well makes.

Charles Hendry (Conservative, Wealden)

I am very grateful for that kind comment.

My final point returns to the clause more generally. I have two concerns, one of which relates to exports. We have not had a clear answer about the issue from the Minister, but the Bill is quite clear. Proposed new section 32B (3) says:

“The matters within this subsection are—

(a) that the generating station, or, in the case of a certificate issued otherwise than to the operator of a generating station, a generating station specified in the certificate, has generated from renewable sources the amount of electricity stated in the certificate, and”—

this is the important part—

“(b) that it has been supplied by an electricity supplier to customers in Great Britain (or the part of Great Britain stated in the certificate).”

From what the Minister has said today, particularly about the super-grid, we do not have clarity about the provision’s meaning. The proposed new section says

“that it has been supplied by an electricity supplier to customers in Great Britain”.

If the super-grid does not sell to customers in Great Britain, but exports directly from British territorial waters to Denmark, Holland, Germany or wherever, what are the implications of the change in the ROC system for it? We must have greater clarity about the process than we have received from the Minister so far. He, himself, was slightly confused about how it might work, so I hope that during the course of this brief intervention, the people who are scribbling furiously at the back may be able to give us some initial guidance.

Malcolm Wicks (Labour, Croydon North)

Why does the hon. Gentleman need greater clarity now? We do not have a super-grid; it is an idea. I think that it is a great idea—an interesting idea. The European Union thinks that it is a good idea, it has asked former Minister Adamowitsch to examine it and we have had preliminary talks. However, the hon. Gentleman talks as if the grid is about to get up and running and as if it is a critical issue that we need to know about by Tuesday. The same situation has occurred once or twice during our debates, regarding provisions that will not be introduced for many years.

Will not the hon. Gentleman, in a kind moment, concede that we have time to think through the issues rather than imply that, in the Bill, I must be absolutely precise about the way in which some renewable electrons in Cheltenham sometimes find their way to Prague? Is he, in asking me that question, being fair, or is he, I suggest very kindly, being slightly ridiculous?

Charles Hendry (Conservative, Wealden)

The hon. Gentleman will be very lucky to get an admission that I am being slightly ridiculous; it would be an unusual admission to make. I always seek to be kind, apart from on the “Today” programme at seven minutes past 7 this morning, when I was in a slightly different mode. There is an important issue before us, however. We are making an Act of Parliament, a statute that will exist for many years to come, and the provision potentially puts a big hurdle in the way of the super-grid. I do not know whether Airtricity, the company that is looking to develop it, has been consulted on the issue, but if it will not be able to use the ROC system for the generation of wind power offshore, which it would directly export from British waters to Germany or somewhere else, there is a potential flaw in the Bill and we are right to address it now.

Perhaps the Minister will tell me that Airtricity and others have been consulted and are completely happy with the provision, in which case I am more than happy to withdraw my concerns. If they are happy, we should be. However, my fundamental concern is that there is a distinct lack of clarity about what that aspect of the clause means, and I am simply trying to get the Minister to give us greater clarity.

Malcolm Wicks (Labour, Croydon North)

I certainly have not received any representations myself—I do not know whether my officials have—from the industry about that concern, because I think that they, rather like me, see its introduction as being some time ahead. However, in the context of the European Union’s 2020 target and the detailed discussions that are now taking place between member states and the Commission, the issue of what a nation state’s target means and whether some renewables might be generated in another European country if it were more cost- effective is being discussed. Those issues are not entirely dissimilar to this one. If and when there is a great grid of wind farms—perhaps tidal and wave—we can address the implications of that in a timely fashion. I will make sure that we consider the matter as part of the renewable energy strategy that we are developing, on which we are consulting in the summer.

Charles Hendry (Conservative, Wealden)

There is furious scribbling going on in the background, which may provide greater enlightenment in due course. I am grateful for the Minister’s response. I am not seeking to be obstructive or awkward and we will certainly not vote against the clause because of this particular element, but I feel that there is a potential obstacle to the exciting, new and innovative approach that we want. I am keen to make sure that that obstacle is removed.

In my earlier comments, I referred to the gobbledegook provision, which is proposed new section 32B(10)(d). I read it out and nominated the Minister for a plain English award for gobbledegook. I asked him to explain what it means because it is so extraordinarily opaque and difficult to understand. I imagine that one of his officials is still in a darkened room with a wet towel around his head trying to find out what it does mean. Before we move on, I would be grateful if the Minister could clarify that provision.

Malcolm Wicks (Labour, Croydon North)

Luckily for me it so happens that I can do so. Having, perhaps rather unkindly, nominated the hon. Gentleman for asking the most absurd and ridiculous question, he has nominated me for gobbledegook. I thought that the purpose of proposed new section 32B(10)(d) was perfectly clear, but for the sake of clarity let me read something out.

ROCs can be issued to generators where it can be demonstrated that the electricity from renewable sources has either been supplied by an electricity supplier to customers in Great Britain or Northern Ireland, or the electricity has been used in a permitted way. I agree that the legal drafting in proposed new section 32B(10)(d) might not be easy to follow—that is what my brief says—but it simply makes it clear that a permitted way includes any combination of self-consumption, supply through a private wire network and provision to a transmission or distribution system. Those permitted ways cover various situations where electricity generated from renewable sources has not been sold on through a supplier or where it is difficult to prove that it has. I hope that that clarifies the purpose of this part of the clause.

Clause 37

Malcolm Wicks (Labour, Croydon North)

This clause makes two supplementary provisions to the new RO sections of the Electricity Act 1989, as set out in clause 36. Subsection (1) aims to ensure timely delivery of a banded renewables obligation. We have set ourselves a challenging timetable in which to introduce our proposals to allow industry to take advantage of the benefits of the RO as quickly as possible. That is particularly important in the light of the EU proposals on renewables that were published recently. Our aim is to bring forward the renewables obligation order with the relevant change by April 2009, which was a commitment we gave in the 2007 White Paper on energy.

The nub of the point is this: to meet the timetable, it will be necessary to carry out a consultation before the Bill has fully passed parliamentary scrutiny. Subsection (1) allows us to consult on the draft renewables obligation order before the Bill receives Royal Assent and to take account of the responses to that consultation. The order will, of course, be subject to further parliamentary scrutiny and will be debated in both Houses before being passed.

Subsections (2) and (3) of the clause allow consequential amendments to be made by order to references in the Electricity Act 1989. The purpose of the provisions is to ensure that, once the legislation has been passed and Northern Ireland makes an order amending the Energy (Northern Ireland) Order 2003 to reflect the changes, references in the 1989 Act to the Northern Ireland order can be changed to refer to the correct numbering. Subsection (2) allows us to extend section 32K(2) to cover ROCs issued by the Northern Ireland authority under the old regime so as to extend provisions relating to the transition from the old regime to the new one in Northern Ireland. This is purely a tidying-up exercise to ensure the renewables obligation can continue to operate on a UK-wide basis.

Clause 38

Malcolm Wicks (Labour, Croydon North)

Just a brief description—the purpose of this clause is to clarify the operation of section 67(1)(c) of the Utilities Act 2000. The Secretary of State has the power to preserve, modify, replace or otherwise deal with arrangements which relate to the non-fossil fuel obligation, the original support mechanism for renewable electricity before the RO was introduced. The non-fossil fuel obligation, or NFFO arrangements, were put in place through orders made under the original section 32 of the Electricity Act 1989. Under the NFFO, electricity suppliers enter into fixed-term contracts with generators for the purchase of renewable electricity. That ensures that renewable generators get a specified price, as set out in the contract for their renewable electricity. The last of those contracts runs up to 2018.

The 2000 Act replaced the NFFO regime with the RO and made provisions for the continuance of NFFO contracts. In particular, section 67(1)(c) provided a power whereby the original NFFO arrangements could be preserved, modified, replaced or otherwise dealt with. The amendment to section 67(1)(c) clarifies that the Secretary of State has the requisite powers to preserve, modify, replace or otherwise deal with arrangements which have replaced original NFFO arrangements. I move that this clause stand part of the Bill.

Clause 39

Malcolm Wicks (Labour, Croydon North)

This clause allows smooth implementation of a reformed RO in Northern Ireland to allow us to achieve our preferred option of a unified approach to the RO across the UK. First, subsection (1) allows the authority, Ofgem, to carry out work in administering the RO on behalf of its opposite number in Northern Ireland, Ofreg. This is the arrangement at present, which works well. The amendments made by this clause ensure that the authority can continue to act on behalf of the Northern Ireland authority even if articles 52 to 55 are amended by an order under article 56 of the Energy (Northern Ireland) Order 2003.

Secondly, the clause ensures that there are no unnecessary legislative barriers to implementing the reforms in Northern Ireland. The provisions in subsection (2) ensure that the Northern Ireland authorities can pass an order under article 56 to take account of the amendments in this legislation as well as the original sections of the Electricity Act 1989. It will enable the operation of a UK-wide RO regime. While it maintains the requirement to consult in the Province, the clause allows that consultation to be done in advance of the article 56 order, thus allowing timely implementation of reforms.

Charles Hendry (Conservative, Wealden)

The Minister will recall that this morning he had a brief exchange with my hon. Friend the Member for East Devon about the rate of ROCs in relation to other parts of the UK, and some views were expressed that three or five ROCs might be provided in support of marine and tidal technology in Scotland. Will a ROC mean a ROC wherever that type of technology happens to be in the UK, or is there scope for varying levels of ROC support for different technologies in different parts of the UK?

Malcolm Wicks (Labour, Croydon North)

I was saying this morning that it is not the case that in Scotland there are four or five ROCs for marine. There is a great deal of interest in the Scottish Executive in marine energy, understandably given the terrain, the Pentland Firth and so on. Our position is that it makes sense to have an RO regime that is common to all parts of the UK. That will be the burden of our current discussions with the devolved regimes. That position is sensible because we are a united kingdom, and because of investor confidence and so on.

Hugo Swire (Conservative, East Devon)

Will the Minister elaborate on that a little more? I understand that he said earlier today that negotiations are continuing with the Scottish Executive. Given that, clearly, the Scottish Executive wish to provide greater incentive or more ROCs for marine technology and wave power north of the border, will the Minister try to increase the allocation in the remaining part of the United Kingdom to what Scotland wants, or will he try to persuade the Scots to reduce to what he wants?

Malcolm Wicks (Labour, Croydon North)

The burden of our discussion will be to try and argue that, certainly in this area, it makes sense to have one uniform regime in which one ROC for marine somewhere is worth another ROC for marine somewhere else. That is what we are trying to do. Without that, we start to run into a good deal of confusion.

Hugo Swire (Conservative, East Devon)

The Minister has slightly avoided my question, which was quite clear. Given that Scotland clearly wishes to move towards an allocation in the range of five ROCs for wave power and three for tidal power—the Minister has been talking about considerably less—will he try to persuade the Scottish Executive to reduce to what he wants, or will he persuade the rest of the United Kingdom to move up to what Scotland wants? Can the Minister put some time frame on when those discussions might reach some sort of compromise?

Malcolm Wicks (Labour, Croydon North)

Those are discussions that we are having already. I cannot quite predict the time frame. I am afraid that I am rather left repeating myself: we would want a common regime. I do not want to say at the moment that the Scottish Executive should reduce to what we say—we have to have a proper discussion about that. But I see the advantages of uniformity. Ultimately, decisions on banding for Scotland are for Scottish Ministers. We are working with the devolved Administrations to try to get a unified system and it is too early to answer that question. It is very much in our minds at present. I am sorry that I cannot be of more help.

Hugo Swire (Conservative, East Devon)

I am grateful, up to a point, to the Minister. But will he not concede that if the incentives were greater in Scotland—given that it is a devolved matter and it is up to the Scottish Executive to set their own levels—that would be a disincentive to investment in the rest of the United Kingdom?

Malcolm Wicks (Labour, Croydon North)

I can see the point, yes. Ultimately, people will invest where there is a strong renewable resource, and I certainly concede that a great deal of the tidal and wave resources are in Scotland, but not wholly—they are around different parts of the United Kingdom shores. These are difficult matters. The issue is devolved. I see the need for some uniformity, and that is how we are negotiating.

Clause 40

Malcolm Wicks (Labour, Croydon North)

This takes us on to a new section of our legislation, concerning offshore electricity transmission. Clearly, given our discussion about the importance of offshore wind to our renewables strategy—and perhaps one day, hopefully, that of marine energy, wave and tidal—this is a significant and quite technical part of the Bill.

We are putting in place a framework to encourage the development of electricity generation from offshore. There are already plans to develop more than 8 GW of offshore wind in UK waters, and in December last year my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform announced draft plans for developing up to a further 25 GW of offshore energy.

The UK has the best offshore wind resource in Europe, and an important part of the framework to utilise this resource is the effective development of offshore electricity networks, which are needed to ensure that electricity generated by offshore renewables can be delivered to shore. Under the Energy Act 2004, the Secretary of State already has powers to introduce a regulatory framework to govern offshore electricity networks connected to Great Britain. Those powers allow for the Secretary of State to make changes to existing industry codes, agreements and licences for the purposes of regulating offshore transmission and distribution.

The Energy Act 2004 also amended the Electricity Act 1989 to provide for the authority—Ofgem—to make regulations facilitating the selection of an offshore transmission licence holder by a competitive tender exercise. The additional powers that we are seeking in the Bill supplement the Energy Act 2004 powers in relation to offshore transmission.

Since the Energy Act 2004 was passed, the Government have been working with Ofgem to develop the detail of the offshore licensing regime for Great Britain that will be implemented using the Energy Act powers. The regime we are developing will apply to the conveyance of electricity generated offshore by high-voltage lines, regulated as transmission. Once the regime comes into force, it will cover offshore lines of a nominal voltage of 132 kV or more.

We have been consulting with industry stakeholders and other interested parties on the policy options for the new licensing regime. The Government decided that an offshore regime that mirrors, so far as possible, the onshore regulatory regime—including a price-regulated approach—was most likely to assist the development of offshore renewable generation and would enable a co-ordinated approach to be taken to the building of new electricity connections needed to connect those projects to the Great Britain onshore grid. [Interruption.] I apologise; I confused the look of great interest with a possible intervention.

Hugo Swire (Conservative, East Devon)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

Yes, unless the hon. Gentleman thinks that it will be helpful if I explain further.

Hugo Swire (Conservative, East Devon)

Will the Minister just pause for a second and then elaborate slightly on the planning issues? Did he say—or did I mishear—that the same planning requirements would be brought to offshore proposals? He has not mentioned tidal turbines and other ways of generating electricity—he is talking about cables at the moment—but is this the time to tell the Committee what planning requirements would apply to offshore tidal turbines and other ways of generating electricity offshore?

Malcolm Wicks (Labour, Croydon North)

No, I do not think that this is the time. If there is an opportunity for saying more about that in due course, I might do so, but I am trying to talk about the grid mechanism. However, I will try to find a way of accommodating the hon. Gentleman’s question in due course if I can—not necessarily during this debate.

As a result of our chosen regulatory approach, offshore renewable generators will receive similar access rights to the grid as generation connected onshore. The Government have also concluded that, because such transmission assets are new and there are no incumbent licensees, there should be competition for offshore transmission licences that authorise the conveyance of electricity from specific offshore projects, rather than awarding one licence for the conveyance of electricity from all projects in an offshore area. We believe that that competitive approach to licensing offshore networks will give new parties the opportunity to enter the market, thus bringing innovative solutions and helping to keep down costs for developers and electricity consumers.

The purpose of clause 40 is to supplement the existing powers and enable the authority—Ofgem—that will have responsibility for running the tender exercise to select offshore transmission licence holders and to recover the costs it incurs through the process. At present, the authority is able to recover the costs of undertaking its duties and functions only through a combination of licence application fees and ongoing licence fees.

Clause 40 will allow the authority to fund its role in the tender exercise by requiring those parties that cause the authority to incur costs in running the tender process to contribute directly towards meeting those costs. We consider that approach to be a more appropriate than the existing cost recovery powers, as it increases transparency and ensures that the costs of running the tenders are met by those who participate in the tendering exercise and not licence holders generally.

Clause 40 will enable the authority, by regulation, to create new mechanisms to recover its costs in carrying out and administering tender exercises. Since the precise details of the tender exercise are still subject to consultation with industry stakeholders and other interested parties, clause 40 has been drafted to provide flexibility in relation to the form of payments to be required and the participants from which they can be recovered. However, we are clear about the broad objectives that we are trying to achieve through the use of these mechanisms. In particular, the mechanisms are intended to ensure that participants in the tender process are appropriately committed to the exercise and that the costs are met by the appropriate persons.

The authority has recently published a document that sets out proposals for a five-stage tender process that would lead to the selection of an offshore transmission licence holder and therefore the award of a licence. To prevent the excess recovery of costs, the Bill includes a provision—proposed new section 6D(5) of the Electricity Act 1989—that will require the authority to take steps at the end of each tender exercise to ensure that the total amount that it has obtained from the participants in the tender exercise does not exceed the actual costs incurred.

Subsection (3) constitutes a technical amendment to the Electricity Act 1989 to ensure that the definition of “relevant offshore line” includes electric lines that are located in GB internal waters.

Finally, clause 40 introduces schedule 2, which will give effect to proposed new schedule 2A to the Electricity Act 1989.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for his detailed explanation of the clause. Most of what he has described appears to be fairly technical and concerns the details of financial arrangements. To that extent, the Opposition support the Government’s approach, as there is clearly no point in having wind turbines across the North sea if they cannot be connected to the national grid.

As I said earlier, the Government have set ambitious targets for offshore wind generation. Will the Minister tell us a little more about what he thinks that will involve and how we will get there? He has talked about the fact that the Government expect about 8 GW to come through anyway; as of December, they have said that they want a further 25 GW on top of that. That is an enormous challenge. Does he believe that the measures are in place to encourage that, and if not, what additional measures are needed to make it happen? Some people say that, to meet that target, two turbines a day will need to be constructed; some say that ten will be needed. What is the Minister’s assessment of how many turbines a day will be needed to meet the target? It seems challenging.

Will the Minister tell us a little more about what he thinks the load factor will be for offshore wind? We understand that offshore wind probably has a higher load factor than onshore wind and that it may be 40 or 50 per cent. Is that also his assessment? To what extent has he had information about how offshore wind, when it does blow, ties in to when we need it most? Is there evidence to show that there is more wind in the winter, when there is greater electricity demand? Is there more wind in the morning and in the evening, when there is also a higher electricity demand? Is there a better match between offshore wind and when electricity is needed than there is, perhaps, with onshore wind?

The clause raises the whole question of the obligations on the National Grid, with regard to its connection of renewable energy sources. The problem at the moment is that it has to connect elements in the order in which applications are made. That causes significant problems. Some onshore wind farms already have planning approval but will not get a National Grid connection for some years. Equally, some onshore wind farms have been given their National Grid connection, although they will be stuck in planning for some years.

There seems to be general agreement that the way in which the National Grid operates should be changed, and it should be able to give priority access to renewables, both offshore and onshore. That has been covered in some of the representations that have been made to us. Scottish and Southern Energy said:

“In addition, the current regime for access to and charging for the GB transmission system is undermining Government policy by sending a signal not to invest in new generation in those areas with an abundance of natural renewable resource. Renewable generators with consent are being held off the grid due to the access regime. Transmission charges are extreme, volatile and unpredictable; hence potential investors cannot gain sufficient confidence to commit to substantial new generation capacity. The Energy Bill is an opportunity for the Government to align the regime for access to and charging for the GB transmission system with its wider energy policy objectives, and particularly it is an opportunity for the Government to address the access and charging issues for the UK transmission system that currently block renewable energy.”

Similarly, Royal Society for the Protection of Birds said that it wanted to give sustainable electricity priority access to the national grid. The British Wind Energy Association said:

“In particular Ofgem’s interpretation of its rules mean National Grid cannot invest in upgrading connection and cabling for new wind farms until developers are able to underwrite their costs. Companies are unable to do this until their schemes are approved and they have secured finance, which can take several years: under current arrangements they would then have to wait further for grid upgrades before they can generate. Ofgem fears that early investment in system reinforcement would result in stranded assets being built. BWEA believes that Ofgem must relax its rules regarding National Grid’s investments, allowing it to adopt a “predict and provide” policy towards connection and grid access issues.”

Finally, the WWF said in its submission that it would like the Bill to give renewable electricity generators priority access to feed their power into the national grid. Will the Minister tell us how far the clause goes in assisting the giving of priority access to the grid for renewable sources, particular those that are offshore?

Brian Iddon (Labour, Bolton South East)

I did not hear the hon. Gentleman clarify the Conservatives’ policy on onshore wind, but I note that their quality of life report said:

“Onshore wind is now at market competitiveness with internal rates of return (IRR) hitting 25 per cent., and so should receive no further support through the proposed banded competitive feed-in tariffs.”

I agree that the clause is about offshore transmission, but the hon. Gentleman has referred to onshore transmission and has indicated that there are some difficulties with onshore wind connection to the grid. Is that still a definitive statement of Conservative party policy regarding onshore wind?

Charles Hendry (Conservative, Wealden)

I am very grateful for the opportunity to clarify this matter. The quality of life report was a submission written to the party board. It was never party policy. We asked various people with a great deal of expertise in those areas to make recommendations on what we should include. That recommendation has not been taken forward—others have, but the more we looked into that one, the more we recognised that the costs of onshore wind have gone up. We believe that the Government are right in continuing the ROC system with a single ROC for onshore wind. I hope that I have clarified where we stand on the matter.

The Minister will know that we have tabled a new clause in relation to Ofgem’s remit that could enable the issue to be addressed in terms of priority access. Some have suggested that a document—MOD 148—will provide the answers to that, but it would be helpful to have the Minister’s assessment for how the national grid should operate in those circumstances. It is clearly in no one’s interest to have people investing in renewable energy sources if they cannot connect them to the national grid.

Martin Horwood (Liberal Democrat, Cheltenham)

I am grateful to the Minister for his opening remarks and, indeed, to the hon. Member for Wealden for his comments. I agree with much of what he said about the importance of priority access, and I thank him for his useful clarification that the well-regarded quality of life report is not actually Conservative party policy. We had suspected as much.

In some of his remarks, the hon. Gentleman strays off the subject of transmission, which is the subject of the clause. In Gloucestershire, we now very clearly understand the difference between generation transmission and distribution. Generation is where the electricity comes from; transmission is how it gets into the county; and distribution is what stops when the substation is flooded—that raises the general issue of critical infrastructure that I will return to.

The clause addresses a potential gap in policy. We are—not literally, I hope—in uncharted waters; a new area of policy with the development of things such as the super-grid. Obviously, new arrangements must be put in place to cope with these developments. We must look at whether the competitive tendering process is the right way to go. I was a little concerned when looking, as I always do, at the Minister’s impact assessment that he signed off on 9 January. It identifies problems that the policy is designed to address. One of those is the lack of a compulsory transfer scheme if commercial negotiations fail between asset owners. That is fair enough. The second problem that it identifies is that

“the Authority’s”

—Ofgem—

“existing powers of cost recovery do not enable it to recover its costs from participants in running competitive tenders to identify an offshore transmission licensee.”

That might be true, but it rather underlines the fact that the competitive tender process appears to have been taken for granted.

As far as I can see, the impact assessment does not identify risks associated with that policy or compare it with other approaches. I was interested to hear the Minister say that different options had been consulted upon and explored, because normally they tend to show up in the impact assessment. However, on this occasion, that does not appear to be the case. One paragraph begins:

“What policy options have been considered? Please justify any preferred option.”

The answer reads:

“The Government has considered (1) the option of proceeding without further powers for the Authority, i.e. do nothing. Its preferred option is (2) taking new legislative powers to establish mechanisms to enable Ofgem to run an efficient and effective tender process and avoid potential delay from commercial negotiations failing to the transfer of property, rights and liabilities. Delays to establishing an effective transmission licensing regime would delay the further development of offshore renewable deployment.”

That is true, but essentially it identifies a financial risk to Ofgem and a problem with the process. It does not explore other options, such as extending the current regime without resorting to offshore renewable transmission.

The national grid was not developed on the basis of competitive tendering processes, but was the result of good old-fashioned central planning. It might be heresy for a new Labour Minister even to consider it, but perhaps it is not wise to think that critical infrastructure is always best developed by the lowest bidder, which is in effect what we will have, especially if that lowest bidder is not the National Grid, but a company developing untested technology on a large-scale.

The impact assessment does not address the risk of quality failings. I would be grateful, therefore, if the Minister could reassure me that serious quality risks were identified and considered in the various consultations and policy options that he explored in advance of drafting the clause. We in Gloucestershire now know the importance of critical infrastructure—if something goes wrong, it has a real impact on people’s lives.

I am concerned that the regime in clause 40, which is quite long, differs from other licensing regimes established elsewhere in the Bill. The Committee has discussed on a couple of occasions already consistencies and inconsistencies between different licensing regimes. In other places, we have been reassured that environmental concerns were paramount and that many conditions could be attached to licences concerning matters such as public health. However, on this occasion, we appear to have been presented with a provision fixed very narrowly in commercial terms and that assumes that the cost-effectiveness of the competitive tendering exercise is the only consideration. The impact assessment promises us 10 per cent. efficiency savings—I think—from the introduction of the competitive tendering exercise, but it does not mention quality risks.

I have some very specific questions for the Minister. What conditions does he imagine will form part of the tender specification in respect of the following: first, the environmental impact of new transmission infrastructure with particular regard to the marine Bill and how any tender would interact with marine management under that Bill; secondly, the proven experience of companies tendering for a contract in delivering high-voltage transmission in other arenas, particularly large-scale national infrastructure, such as offshore; and, thirdly, the importance of establishing that there is good technological grounds for the tendering company being able to establish an interconnection with the existing national grid? I should like specific answers from him, if possible, on those three matters.

As the Minister said, we are discussing 8 GW of capacity, possibly rising to as much as 33 GW of UK electricity generating capacity being placed offshore. He is now frowning from a sedentary position, but his exact words were, “8 GW and then a further 25”. Was that not right? Did he mean a total of 25?

Malcolm Wicks (Labour, Croydon North)

I am in a sedentary position because that is the polite place to be. I was frowning at nothing that the hon. Gentleman said. When he says something really ridiculous, I will certainly frown.

Martin Horwood (Liberal Democrat, Cheltenham)

I am very grateful to the Minister, and I shall try to avoid saying anything ridiculous.

The scale of offshore renewables is potentially huge. If Airtricity was planning a super-grid or a super-grid was delivered by any other company, it would be absolutely essential to get the thing right. The potential of offshore renewables is huge and they will be essential elements of the national infrastructure. Perhaps we should have a self-denying ordinance among all members of the Committee that we do not tell the hon. Member for Stone (Mr. Cash) that the European Union offshore wind co-ordinator even exists; otherwise I can imagine an entirely new debate on the European Union treaty taking place.

Malcolm Wicks (Labour, Croydon North)

Again, it has been an interesting debate although very little of it has been about the clause even though the clause is important. It is quite detailed and relates to the carrying out and administration of tender exercises for selecting the holders of offshore transmission licences. It provides express powers for the authority to recover its costs in relation to such tenders, as I outlined earlier. On that—perhaps understandably—colleagues have hung several questions that are not strictly to do with the clause, but which really need a larger debate on environmental impacts.

Everything we do offshore, whether the oil rig or wind farm, involves the careful assessing of environment impacts. We would not give a licence in waters where dolphins might be under threat, for example. [Interruption.] No, it is not in the clause because that is not about dolphins. We cannot hang everything on the clause, although there might be opportunities for raising some issues. It is unfortunate that the hon. Member for East Devon has left the room, although he might be coming back at which time I shall answer his question.

The hon. Member for Wealden asked about electricity networks. Given our programme on offshore wind, it is clear that, during the next 10 to 15 years, the UK will need to deliver a significant increase in the proportion of our energy from renewable resources. The implications for that for offshore wind are considerable. It sets an unprecedented challenge for our electricity networks, and highlights the urgent need to tackle any barriers to grid access for renewable generators. That means considering the longer-term, technical and, indeed, regulatory challenges of high levels of renewable generation. I assure him that we are working closely with industry, the National Grid and Ofgem to ensure that the grid is fit for purpose in the quite challenging times ahead as we move to a low-carbon energy system in the UK and Europe. We particularly need to ensure that the system can efficiently accommodate the expected expansion in renewable generation to 2020 and beyond.

Together with Ofgem, the National Grid and the industry, we are undertaking a number of initiatives to address short-term, medium-term and long-term grid-related barriers to renewable generators. As we develop our renewable energy strategy, we will need to consider what further measures beyond the current transmission access review we should take to deliver grid access in support of our targets. The transmission access review led by Ofgem and my Department is examining the framework for grid access for renewables to ensure that it remains fit for purpose. An interim report was published last month and a final report and recommendations are expected in May of this year.

The hon. Member for Wealden asked for further details about the offshore transmission regime. We always expected a significant contribution from offshore wind, but I cannot go into detail about how many wind turbines will be built over what period. We are the licensing body; we look at environmental impacts; we provide a regulatory framework. At the end of the day, it will be for commercial developers to come forward with their own proposals and I cannot prejudge that in any detail.

Charles Hendry (Conservative, Wealden)

The difficulty the Minister has is that the Government have set the target. They have said that they want by 2020 the 8 GW that is planned already plus another 25 GW of offshore wind, so 33 GW in total. They must, in reaching that target, have worked out how that is going to be achieved, how many turbines are going to be necessary, what the construction rate is going to be and to make sure we have the skills available to erect them. My assumption is that that work has been done by his Department so that the Secretary of State can come forward with that target. As the work has been done, it would be good if the Minister could share it with the Committee.

Malcolm Wicks (Labour, Croydon North)

We do not have a target for offshore wind. We are developing, through discussions with the European Commission, what our targets should be in 2020 for all energy coming from renewables. That is where we are.

The hon. Gentleman is thinking about the Secretary of State’s statement about our ambition for the development of offshore wind and how that will influence our licensing procedure. We cannot be in the business of saying there will be so many wind turbines or so many biomass plants. We have a licensing regime that we hope will facilitate a massive expansion of offshore wind. [Interruption.]

Charles Hendry (Conservative, Wealden)

You are speaking.

Malcolm Wicks (Labour, Croydon North)

Yes, I am speaking; it is sometimes difficult to remember. I am so impressed when the hon. Gentleman speaks that there is a bit of me shouting, “More!”. I must not frown at the fact that I do that.

The hon. Member for Wealden also asked me about load factors. Yes, offshore wind has a higher load factor than onshore wind. There is certainly a significant resource offshore. We are currently undertaking a strategic environmental assessment to assess some of the environmental impacts as we go forward with a potential 25 GW coming from this resource.

The hon. Gentleman also asked me about priority access for renewables. We have a proposed new clause on this issue, which we will come to later. I would be grateful if I could deal with that matter then.

The hon. Member for Cheltenham was interested in what other options we were considering. He mentioned, as a good central planner, the possibility of the National Grid doing this work. As he knows, National Grid has a long-held onshore monopoly business which is regulated by Ofgem. The new regime for offshore transmission provides the opportunity for new companies to enter the market and bring new and innovative solutions to grid-connect offshore.

The Government have consulted extensively with industry on the establishment of the new regime and have concluded that the best approach is the use of competitive tenders to select offshore transmission licence holders. In the consultation with stakeholders the extension of National Grid’s onshore monopoly was not supported by any offshore wind developers. A number of capable and experienced partners have expressed an interest in becoming offshore transmission owners. We, therefore, believe it is right to test the market by competitive tender to find the best candidates to build these new offshore connections. National Grid should be able to enter such tenders, provided that it does not interfere with its role as the Great Britain system operator, which the Government have already announced that they intend to extend offshore.

Martin Horwood (Liberal Democrat, Cheltenham)

I am grateful to the Minister for his comments and his explanation that the consultation was a bit more expansive than we might have guessed. We might not have guessed because there is no mention of those options having been discussed in the impact assessment. It simply looks at the option of doing nothing or having the current regime. Is it possible for him to place on the record or to supply to Committee members any details of the consultation that has taken place and of the risks that might have been identified with going down the competitive tendering route?

Malcolm Wicks (Labour, Croydon North)

I am happy to do that and I will write to the hon. Gentleman and send copies to the Committee.

I was again asked by the hon. Member for Cheltenham about the regulator recovering costs in the future. Certainly, there are similarities between what Ofgem will be doing with the competitive tenders for licences for offshore transmission owners and Ofcom’s function. The similarities are competition for licences, which I have said is very important; a process run by a regulator, which is key to this; a process set out in regulations; and the ability to require deposits, which can be refunded in whole or in part. However, there are instances in which the regimes differ, and clause 40 is by no means identical to Ofcom’s powers. Clause 40 has been developed to be fit for the purpose for which we intend it, namely, the offshore transmission regime.

The hon. Member for Cheltenham asked about the environment and I suggested to him that there was a wider debate to be had about offshore environmental issues. They do not actually relate to the clause. Participants who are building assets will need to secure consents for their lines, which will require them to undertake environmental impact assessments, just as is the case now. I hope that that satisfies him.

Martin Horwood (Liberal Democrat, Cheltenham)

I regret to say to the Minister that he has not satisfied me, particularly about the new provisions coming in under the marine Bill. Although he keeps suggesting that some of the issues that I have raised do not relate to the clause, I think that they are perfectly germane to it because it establishes the licensing regime. Therefore, it is perfectly valid to ask what conditions tenders will be issued under. The environmental considerations are absolutely important. The regime established here today or by the passage of the Bill should be consistent with the new regime introduced in due course by the marine Bill.

Malcolm Wicks (Labour, Croydon North)

I am trying to say that this is an important clause and that it is about the way in which licences for grids will be regulated and about certain issues of costs for Ofgem. It is not a whole clause saying for the first time, “Let’s build offshore wind and let’s consider the environmental impacts.” That is covered elsewhere.

I shall say something about planning because I was asked about it by the hon. Member for East Devon, but I was hoping that he would have returned to the room before I mentioned this. We expect that once the proposals in the Planning Bill and the draft marine Bill are in place, the following planning arrangements will apply. I say “expect” because the draft marine Bill has not yet been published and the Planning Bill is going through Parliament, and I do not want to prejudge anything. If both go through, as we assume at the moment, the planning regime will be as follows. Generating stations with capacity greater than 100 MW will be considered by the infrastructure planning commission and those under 100 MW will be considered by the marine management organisation, which will be part of the new regime of marine spatial planning. I should add that currently all stations with a capacity greater than 1 MW are considered by the Secretary of State. The connecting cables will be considered as part of the project being considered. Therefore developers will not have to seek planning permission for the cables separately. I hope that goes some way towards answering the hon. Member for Cheltenham, although I fear not far enough to satisfy him, because he wants to hang a whole debate about the marine environment on this particular clause.

Martin Horwood (Liberal Democrat, Cheltenham)

I do not want to try the Minister’s patience, but I am not raising issues about the whole offshore generation of electricity here. I am specifically talking, as the clause does, about the transmission infrastructure and how that will impact on the environment and other issues about the proven experience of contractors and the interconnection with the existing grid. His answer to the hon. Member for East Devon goes some way towards answering some of that, although it is rather surprising that there will be this separate licensing or tender regime if it is simply going to be part and parcel of the main projects themselves. That is quite a surprising revelation.

Malcolm Wicks (Labour, Croydon North)

No, I do not think it is. I think I am right in saying that the hon. Gentleman is more ambitious about this clause than I am. It is really dealing with some rather important matters, but in terms of environmental concerns, this clause does not establish the regime—much of it was established in the Energy Act 2004. These technical powers supplement that. The environmental impact will be considered through the planning process and any strategic environmental assessments, as I hoped I had made clear earlier. The environmental issues will be looked after and the fact that they are not mentioned in this clause is neither here nor there. We have legislative cover for that already.

The hon. Gentleman also asked about technical competence. We expect that participants in the process will have a proven track record in delivering major electricity infrastructure. The assessment of those in the process will need to take account of technical competence to ensure that the grid is fit for purpose. Existing UK and European players have expressed an interest in building offshore infrastructure.

I think I have dealt with impact statements and I have promised to write to the hon. Member for Cheltenham about the options we were considering and to copy that to other hon. Members.

Schedule 2

Malcolm Wicks (Labour, Croydon North)

Once the new offshore transmission regime goes live—currently expected at the end of 2009—all projects that connect to shore via lines of 132 kV or above will be covered by the new licensing regime. This means that some projects that have already been built or are currently under construction will need to be subject to the new tendering process for offshore transmission licences.

To date, the sub-sea cables and associated equipment that will convey electricity from offshore generating stations to the shore have been developed by generator-developers. Careful consideration has therefore been given to the specific arrangements that will need to be put in place for offshore projects that are already completed, will be completed or will be well developed by the time the new regime goes live. Ofgem will be running a competitive tender process to select the holders of offshore transmission licences in respect of these transmission assets.

For these projects, once an offshore transmission licensee has been selected under the tender exercise, any transmission-related property, rights and liabilities held by the generator-developer or other relevant asset owner must be transferred or made available to the offshore transmission licensee within a reasonable time. This will enable the licensee to perform its licensed and statutory obligations and convey the electricity generated to the onshore network. Schedule 2 enables the authority, in certain circumstances, to make a scheme transferring property, rights and liabilities from the existing owner to the successful bidder for the offshore transmission licence.

We expect that it will be in the relevant parties’ interest to reach a commercial agreement as to the terms of the transfer. In most cases, therefore, we would not expect the authority to be asked to use the powers set out in the schedule to make a property scheme. However, the power to make a property scheme will help to ensure the efficient and timely transfer of property, rights and liabilities from the owner of the assets, usually a generator-developer, to the successful bidder for the offshore transmission licence if they cannot reach an agreement through commercial negotiations. This will provide certainty and reassurance to tender participants for certain transitional projects. It will also help ensure that the parties involved are not placed under undue pressure by a third party seeking unreasonable commercial advantage.

I shall highlight a few key features of the property scheme. The authority may make a scheme only upon application and the scheme provisions must be necessary or expedient for the offshore transmission licence holder to perform its functions. There are also provisions in the schedule covering compensation, protecting third-party interest and an appeals mechanism.

We believe that the compulsory property scheme will be used only in a small number of circumstances, and consider that the existence of the powers will now encourage parties to seek fair commercial negotiations where otherwise they might not do so.

Clause 41

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 25, in clause 41, page 37, line 5, at end insert—

‘(c) activities preparatory to the matters mentioned in paragraph (b);’

Joan Humble (Labour, Blackpool North and Fleetwood)

With this it will be convenient to discuss Government amendment No. 26

Malcolm Wicks (Labour, Croydon North)

We now turn to a series of clauses that relate to nuclear energy—and I hope, with your permission Mrs. Humble, that before I go into the details of this amendment, the Committee might find it helpful if I briefly set out the context behind this chapter.

Joan Humble (Labour, Blackpool North and Fleetwood)

Order. The Minister may make a very brief introduction because there are several clauses all on the nuclear programme, but I advise that it is a brief introduction so that it does not generate a wider-ranging debate on the clause. Members will have the opportunity to discuss individual matters in each of the following clauses.

Malcolm Wicks (Labour, Croydon North)

I will be brief.

We are creating a framework for ensuring that the operator of a new nuclear power station is responsible for, and makes prudent provision to meet, the full costs of decommissioning and their full share of waste management costs. By full decommissioning costs, I mean the costs of dismantling the nuclear power station at the end of its generating life, removing all station buildings and facilities and returning the site to a state agreed with the regulators and the planning authority, and the release from the control of the nuclear site licence. This is likely to be a state similar to greenfield, depending on the state of the site before the construction of the station. By full share of waste management costs, I mean the costs that are directly attributable to disposing of new-build higher activity waste in a geological disposal facility, a contribution towards the fixed costs of constructing such a geological disposal facility, a significant risk premium over and above those costs—to take account of uncertainties around the cost of constructing such a facility and the time when it will be able to accept new-build waste—and the cost of waste pending transfer for disposal.

Amendment No. 25 will ensure that an operator will have to set out, as part of the decommissioning and waste management plan, what activities they would undertake by way of detailed technical and operational planning for the decommissioning and waste management and disposal activities that take place once the station has ceased generating electricity for the final time. It is important that this activity can be regulated as part of the funded decommissioning programme, because it will ensure that the operator starts to think in detail in advance about how those decommissioning activities will take place. As clause 41 is drafted, the operator will be required to set out in its decommissioning and waste management plan how it will account for the decommissioning and waste management and disposal activities throughout the life cycle of the station. By making this amendment, the Government want to ensure that the operator of a new nuclear power station also makes provision for, and sets out, the preparatory activities associated with decommissioning and clean-up of the power station.

Amendment No. 26 allows the Secretary of State, if needed, to make an order that will mean that the preparatory activities specified in amendment No. 25 can become designated technical matters. A designated technical matter is one that must be provided for in the independent fund for decommissioning and waste management. It is also therefore, by definition, an activity on which an operator can spend resources from the independent fund. The effect of amendment No. 26 is to ensure that not only will preparatory activities to the decommissioning and clean-up of a power station be regulated, but that the operator must make financial provision for those activities when the station is generating electricity. I ask hon. Members to consider these technical amendments.

Stephen Ladyman (Labour, South Thanet)

I gave my hon. Friend advance notice that when we came to this chapter, I would probe him on the rather draconian attitude that it seems to be taking. Will he explain, either now or later, what the final sentence clause 41(5) means? It states,

“and for the purposes of paragraph (a) a nuclear installation is not to be regarded as being operated at a time when it is being decommissioned.”

As something that is being operated cannot be decommissioned, that seems an unnecessary statement. Does that imply that the decommissioning programme has to include the long-term storage of the waste and the results of decommissioning a power plant, and for how long does the decommissioning programme have to allow for that waste to be stored?

Joan Humble (Labour, Blackpool North and Fleetwood)

The hon. Gentleman’s intervention seems to relate to a clause stand part debate rather than to the amendment that the Minister has just moved. Perhaps the Minister will consider it as part of the clause stand part debate.

Malcolm Wicks (Labour, Croydon North)

I am grateful to my hon. Friend for asking that question, and there will be opportunities to give him an appropriate answer.

Malcolm Wicks (Labour, Croydon North)

Where a person applies for a nuclear site licence and intends to construct a new nuclear power station—by “person” we mean a corporation as well—that person must give written notification to the Secretary of State of the application. They must also prepare and submit a funded decommissioning programme for approval.

In brief, the clause requires a programme to address three key matters. First, it requires that the funded decommissioning programme must make provision for the technical matters involved in the treatment, storage, transportation and disposal of hazardous material during the operation of a nuclear site and for decommissioning and cleaning up of a site once that station has ceased generating electricity.

Secondly, it requires operators to set out estimates of the costs of taking the steps in relation to “designated technical matters”. These matters are decommissioning, waste management and waste disposal, which take place once the station has been shut down for the last time, plus certain additional decommissioning related activities that are undertaken during the generating life of the station. The Secretary of State may specify the latter category of designated technical matters by affirmative order, which comes under clause 41(6)(a). Designated technical matters must be costed by the operator and paid for from the independent fund.

Thirdly, operators are required to set out details of the security that they will put in place to meet the costs of these designated technical matters—we have just passed an amendment that relates to that. Not all the matters relating to a decommissioning programme will be designated as technical matters. In other words, even though the operator will be expected to provide details of all the steps necessary to decommission the installation and clean up the site, he will not be required to provide cost estimates for all those steps, nor to provide security to meet all those costs.

As regards waste and decommissioning-related activities undertaken during electricity generation but that are not designated,the Secretary of State will expect payments to be made from operating expenditure at the time these expenses are incurred. An example of this could be packaging and disposal of low-level waste during the operation of a power station. At this time, the operator will have ready access to sufficient moneys to meet such costs. These costs will therefore not be subject to regulation, although the activities to which they relate will be. More information on this point is set out in the guidance, and we are currently consulting on that.

In our nuclear White Paper which was published in January, we said that the Government had determined that

“independent funds, outside of the control of nuclear operators, should be created to accumulate and manage payments from the operator to meet the full costs of decommissioning and a full share of waste management costs.”

Hugo Swire (Conservative, East Devon)

Can the Minister tell the Committee whether this is a new stricture on the operators, or has this always happened in the past when licences have been granted? Can he also tell us how long a new-build nuclear power station is likely to last? Further, in relation to the separate fund he just mentioned, is he talking about a hypothecated fund, a deposit made by those who are granted licences to be put in an escrow account, given the fact that anything might happen over the period of operation?

Malcolm Wicks (Labour, Croydon North)

I shall return to the hon. Gentleman on the first point. I gave a fantastic answer to his planning question earlier while he was absent, but I cannot immediately give him a fantastic answer to that point. I also want to make sure that I fully understood the question about whether this is a new power. We have not built any nuclear power stations in recent times. Our main concern here is to ensure that the companies pay the full cost—over the whole life cycle of nuclear generation and decommissioning—and that there is a properly protected fund that is separate from the normal accounts of the company and that can be used for this purpose in due course. That is the nature of our policy.

Charles Hendry (Conservative, Wealden)

Is it not the case that the distinction is that the last nuclear power stations to be built were constructed by the industry when it was nationalised? Therefore, by definition, the Government would have taken on responsibility for the waste at the time those stations were being planned and built. The difference now is that one is looking at the private sector to do that and therefore new obligations on the industry are necessary to make sure that they dispose of its own waste and cover the associated costs.

Malcolm Wicks (Labour, Croydon North)

I am grateful to the hon. Gentleman—that is the essence of the point. The Government certainly now take on the responsibility of the nuclear legacy—for disposing of that waste and for funding its disposal. It is a different ball game. When it comes to moving forward that will depend on private sector investment.

Stephen Ladyman (Labour, South Thanet)

Before my hon. Friend moves on—

Malcolm Wicks (Labour, Croydon North)

I do not think I have moved on, but I am quite happy not to be moved on.

Stephen Ladyman (Labour, South Thanet)

I think my hon. Friend just moved on. I will just play back to him what I think he said so that he can clarify it to me. I think he said that when one of these new power plants is operated, the person operating it will be making money, so we know that they will have this money to manage the site. We are not too worried about that, but when he turns the plant off, he stops making money. We must therefore ensure that he has some money put aside to cover the long-term costs. The question is how long do we expect him to plan for those long-term costs. We have just been through a chapter dealing with carbon capture and storage and we said that there will come a time when the state takes responsibility for the liability. At what point will the state be liable for radioactive waste? I believe that the state should take responsibility for it at some point.

Malcolm Wicks (Labour, Croydon North)

I better understand my hon. Friend’s concern. Our principle and endeavour is to ensure that companies pay the full costs of the nuclear energy facility that they have brought into being. That includes their forecasts of final deep geological disposal. We are consulting on where that deep geological disposal might be, but we intend for the operators to pay the full costs. Deep geological disposal will not only be there for the legacy of nuclear waste, which is a state responsibility, but it will have to be bigger to ensure that it can take the new waste too. The operator will pay the full costs of extra space, and it will also be charged to ensure that it also pays for some of the infrastructure of the disposal facility. Once that is done, the responsibility of the company ends and that of the state takes over. Has that helped my hon. Friend?

Stephen Ladyman (Labour, South Thanet)

It is very helpful. Let me ensure that I understand it. The operator will have paid something towards the cost of creating the depository and the cost of transporting the material and putting it safely there. At the point at which the waste is put in the long-term depository, the liability ends and the state takes over.

Malcolm Wicks (Labour, Croydon North)

Yes, that is our plan.

The hon. Member for East Devon asked how long a nuclear plant might exist for. Our planning assumption is 40 years. That might be a conservative assumption for the purpose of cost estimates, and it would be open to new-build operators to suggest and make the case for alternative station lifetimes in their funded decommissioning programme. The Secretary of State will consider alternatives on a case-by-case basis. However, the planning assumption is 40 years.

Martin Horwood (Liberal Democrat, Cheltenham)

In terms of the operation of the site, is not the planning assumption for the current generation of nuclear power stations that the sites will remain contaminated and will effectively still be in the process of final decommissioning for something closer to 100 years?

Malcolm Wicks (Labour, Croydon North)

I answered the question because I was asked how long the nuclear reactor might be up and running. As I said, our planning assumption is 40 years, and I have explained that there could be some flexibility around that. It might be a conservative assumption. Of course, after that, it will take much longer for the site to return to an original greenfield state—that brings us to a range of technical issues about interim storage and so on. The hon. Gentleman is right to imply that once the generator is switched off, things do not magically return to normal the next day.

Brian Iddon (Labour, Bolton South East)

The hon. Member for Cheltenham implied that the site would be left contaminated. That is surely not the point; it would not be left contaminated by radioactive waste.

Malcolm Wicks (Labour, Croydon North)

Of course, it will not be left contaminated, but I was conceding the point that, after 40 or 50 years, there will be a period before the site can safely be returned to greenfield or whatever. That will be for a number of years and there are issues about interim storage and so on However, obviously no one will leave the site contaminated; that would not be allowed. Both the hon. Member for Cheltenham and my hon. Friend were right—I am feeling generous.

I was asked about the new regime. The hon. Member for Wealden helped me to answer the question. The Health and Safety Executive requires operators to make provision for decommissioning activities. This is part of licence condition 35, as the hon. Gentleman knows and as it says here helpfully and in some detail. These new provisions make it a requirement for operators to set aside funds to decommission the plant and manage waste.

All that has been so exciting, I am trying to remember where I was. I think I was trying to make a speech on clause stand part. This is what I was about to say—after those very useful interruptions. As set out in draft guidance, independent funds are the primary form of security that the Secretary of State would expect to see put forward in a programme to meet the operator’s decommissioning, waste management and waste disposal costs in accordance with clause 41(7)(c). Clause 41(8) allows the Secretary of State to charge a fee to the person submitting the programme. This will allow the Secretary of State to recover the costs of considering the programme, including obtaining advice to verify certain aspects. It is important that the Secretary of State can rely on this verification because of the level of detail that will be expected in a programme.

Where the licence holder of a power station changes, the prospective licence holder will have to submit a programme to the Secretary of State for approval. The prospective licence holder must obtain approval before he takes over the operation of the station. This will ensure that there is a funded decommissioning programme covering the station at all times.

Debate adjourned.—[Alison Seabeck]