Energy Bill [HL] — House of Lords, 2015-09-14
Topic: Energy
James Wallace (Liberal Democrats, Centre to centre-left): My Lords, we gave notice that we would seek to oppose that Clause 60 stand part of the Bill as an opportunity—one already foreshadowed—for a general debate on the merits of the proposal that no renewable obligation certificate should be issued under a renewable obligation order in respect of electricity after 31 March 2016 by an onshore wind generating station accredited after that date, in other words a year earlier than the established timetable that coalition Ministers signed up to I take the point made by the noble Lord, Lord Howell, although my noble friend Lord Teverson effectively rebutted it. Of course one does not wish to pour money in to help profiteering or have dead weight. However, it is very clear that the coalition agreed that the renewable obligations for onshore wind and others would cease on 31 March 2017. It is bringing that forward by a year that gives rise to such consternation in the industry. It is an understatement that the announcement, made just over 10 months before it takes effect, has caused widespread dismay in an industry in which, by its very nature, there will always be very long lead times. One developer who wrote to me said, "Unilateral changes to policy have impacted upon investor confidence and the sector will without doubt see retrenchment that will result in a loss of jobs and growth in Scotland and around the UK. The loss of clean, affordable and secure energy is coupled together with a loss of investor confidence in the UK Government’s willingness to remain as a reliable, long term partner for infrastructure developments, that often take upwards of five years merely to bring to a planning application stage." That reflects what the noble Lord, Lord Cameron of Dillington, said on the last amendment. It is not just with specific regard to wind power that this change at relatively short notice can have an impact. All the sources of renewable generation of electricity have long lead times. There will now be a question mark over each of them as to whether the Government, if they are capable of changing policy at very short notice in respect of onshore wind, will also change it in other developments. Inevitably, that could have a chilling effect on these developments It is interesting that the Renewable Energy Country Attractiveness Index published by Ernst & Young in June indicated that in terms of onshore wind the rankings for the United Kingdom had gone down from eighth to 11th. I think that was in the course of just one year. It noted that onshore wind was quickly becoming one of the country’s cheapest sources of energy. The Government’s intention to withdraw support for onshore wind therefore contradicts their pledge to reduce emissions at least cost; energy prices could be pushed up as more expensive sources such as offshore wind are used to fill the capacity gap as onshore wind projects fall away. Of the many sources of renewable generation of electricity, possibly with the exception of hydropower, onshore wind might be said to be the most mature I indicated in an earlier debate that 75% of these developments are in Scotland, which directly employs more than 5,400 people. They generated more than a third of Scotland’s electricity needs in 2013 and are driving billions of pounds of investment to allow the United Kingdom to meet its renewables and climate targets. What concerns us about this clause is the threat to business confidence, to jobs and to the prospect of the United Kingdom meeting its climate targets With regard to business confidence, I have already indicated that what can happen in one sector can happen in others. The conclusion of the Ernst & Young survey of lender attitudes to the early closure of renewable obligations support mechanism and a survey undertaken for Scottish Renewables published over the weekend states: "Raising project finance for UK onshore wind RO projects has become more complex, more expensive and increasingly more difficult since the early closure of the RO and supporting grace period. As a result there are fewer banks willing to lend to UK onshore RO projects. Those that are considering lending are seeking better terms and some form of mitigation against the situation with no ROC revenue; and as we move closer to the RO accreditation end date, the ongoing uncertainty makes it harder for projects and sponsors to raise senior finance" So there would appear to be an issue of business confidence. The Minister said in an earlier debate that the Secretary of State had met the developers and assured them that wind power would continue. He mentioned in another context that there would continue to be community developments. The sense I am getting is that this is not the cast-iron guarantee that he indicated the Secretary of State’s approach seemed to be. There is also the question of the position on onshore wind power with regard to future CFDs and, in particular, when the next CFD will be. If business confidence is damaged there is inevitable damage to jobs and the industry as a whole. RenewableUK said the changes to financial support for onshore wind threatens survival of the industry in the UK and 19,000 jobs supplied to the sector One cannot readily understand why a Conservative Government, who purport to be business-friendly, are threatening what has become a very important business in the United Kingdom over recent years. The purpose of this debate is to try to flush out the Government’s expectations. What reasonable expectation can the industry have that onshore wind will be included in a future CFD round? Can the Minister give an indication when that will be? We are always told that one of the reasons for doing this is to drive lower consumer bills. I cannot fathom why you would prejudice the renewable technology sector, which is likely to deliver most and is becoming steadily cheaper? If you take out onshore wind, solar and hydro, then you are looking to the more expensive options such as offshore wind, tidal power and wave power—developments that I would very much support, but which I readily acknowledge would be far more expensive. Nuclear power is often the Government’s other option, but we hear that Hinkley Point is probably looking as far ahead as 2027 before that is actually commissioned and, again, it is more expensive than onshore wind. I believe that there is a threat to our climate targets The fourth carbon budget, published in December 2013, set out the requirements on decarbonisation including projections on how to decarbonise electricity by 2030, which the climate change committee says is necessary to maintain the most cost-effective path to the low-carbon economy. It set out four scenarios and it looked at the high and low scenarios in favour of nuclear and wind. If one takes out onshore wind, which is not going to reach its expected level because of the lack of developments from this measure, and if we believe that the contribution of nuclear is going to be very delayed, how do the Government think they will meet these decarbonisation targets? Uncertainty impacts on a whole range of renewable technologies and it would be useful in this debate if the Government gave the House a clear indication as to how they see the road to a lower carbon economy, given that they are taking away support for the cheapest option and will have to rely on the more expensive options The Government talk a good game—they talk about going to the Paris climate change talks and wanting to give leadership. But it is difficult to see how leadership can be given when the practice is to undermine some of the very measures that would allow us to move forward and meet our renewables targets. Therefore, if the Government are to give any leadership at all in Paris, and have any credibility there, they must set out very clearly how they see the components of their renewables strategy as we move forward. On the back of this particular clause I do not think that any of us have much confidence that they will do so.