§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Clelland.]
§ 10.2 pm
§ Dr. Alan Whitehead (Southampton, Test)As hon. Members will know, the United Kingdom has signed up to a 12 per cent. reduction in 1990 levels of CO2 emissions and is likely to be one of the few countries that will achieve its initial commitments under the Kyoto protocol within the time scale that has been set. However, that target has largely been achieved by the environmental success of a policy—the so-called "dash for gas"—that was designed by the previous Government primarily for another policy purpose.
Gas power generation, although less profligate with CO, emissions then other forms of power generation, still relies on a fossil fuel and generates substantial amounts of CO,. As we approach the next stage of CO, savings—perhaps the UK's commitment of a 20 per cent. reduction in emissions—the curve of pain becomes steeper. There does not appear to be a second wave of magic solutions that will allow us to reach such commitments without pain.
One of the most promising avenues in that context is the aim of progressively replacing energy supply from fossil fuels with supply by renewable methods. The Government's commitment to supply 10 per cent. of energy by renewable means by 2010 is therefore laudable and is set out well in the recent consultative paper from the Department of Trade and Industry, "New and renewable energy—prospects for the 21st Century".
The paper singles out offshore and onshore wind power and biomass energy generation as the two most immediate technologies that will contribute to that target. In a clear and straightforward manner, the paper lays the ghost of the belief that renewable energy is the province of dreaming cranks. Scientific advances have made the contemplation of substantial energy generation by renewables a real and economically feasible prospect. Indeed, other countries have already almost achieved that. Brazil produces 80 per cent. of its energy from hydro-electricity or biomass conversion. Denmark is projected eventually to provide 36 per cent. of its total energy requirements from wind power.
It is therefore disappointing to read in the otherwise excellent consultative document that photovoltaics is regarded as a long-term prospect at best and does not feature strongly as a leading likely source of renewable energy. That is particularly disappointing because, of the leading sources of renewable energy, photovoltaics has, perhaps, recently enjoyed the most spectacular scientific development as a viable technology, but it is, possibly, why PV remains a marginal contributor, in the UK at least.
It is possible that received thought still believes that PV involves slinging huge, clunking solar panels on to the side of buildings, thereby offending passers-by and planning committees alike. It is possible also that the deeply ingrained British myth that it rains here most of the time, and when it does not, it is foggy, creates a belief that PV is fine in equatorial Africa but is not for the likes of us. On the contrary, modern PV installations work well with light, and do not need bright sunshine. Thin-film 262 technology means that typical PV installations need be no more obtrusive than the normal tiles on the roof of a house. Technological development is proceeding rapidly in, among other places, the sustainable energy research group at Southampton university in my constituency.
The failure to exploit PV represents not one, but two, lost opportunities for the UK. Not only are we denying ourselves the benefit of a viable and entirely renewable energy source, but we are starving a potentially economically important and world leading industry of the domestic market from which it could gain for its successful development. That market is expanding globally as quickly as that for mobile telephones or internet services.
The UK currently has 10 per cent. of the world's photovoltaics market, but almost all installations built or researched by UK companies are not in the UK. The photovoltaics industry in the UK employs about 400 people only. The lack of a mass production market in the UK leads to continuing high costs for PV installations, which in turn damps down demand further.
Furthermore, as I shall illustrate, contrary to the policies of a number of other countries with comparable climates, our regulatory arrangements consciously discriminate against the successful spread of PV. Germany currently has embarked on the 100,000 roofs programme, which is designed to establish that number of individual PV installations by 2004. Japan aims to supply 4,600 MW from PV installations—an output equivalent to that of four fossil-fuelled power stations—by 2010. The USA plans for 1 million roofs to be powered by PV by 2010. All those schemes are supported by a form of underwriting in the first instance, through regulation of the purchase regime for energy or through installation grants.
Other countries do not regard PV as a long-term technology; they are investing in PV programmes now. Those programmes are inevitably stimulating manufacturers and supplies based in those countries. Already, one of the leading solar energy developers, BP Solar, has announced that, tragically, it is moving most of its activities to where the market is—the USA—following the company's takeover of Amoco. By contrast, Britain has just announced an experimental programme, which is welcome in context, to underwrite PV installations on 100 roofs, at a cost of £1 million.
I do not want to argue only on the basis that the British have a habit of being left behind in the commercial application of new technologies. I want to argue for the development of a self-sustaining market in the UK which may require some support at the start but which, with proper assistance and regulation, could, in a relatively short time, supply substantial elements of UK domestic and commercial power needs at competitive prices.
The reason why such a market is eminently feasible in the UK lies in our high degree of urbanisation. Other forms of renewable energy require fast-flowing streams, windy headlands or set-aside land on which to grow willow. One cannot develop those technologies in urban areas, but 80 per cent. of us live in towns and cities, under that great unexploited resource of the modern age: the urban roof. The average south-facing roof can sustain PV tiles that can generate upwards of 2,000 units of electricity per annum, when the consumption of the average household runs only to about 2,500 units a year.
263 In other words, one's own roof, doing nothing but staying where it is, can replace 80 per cent. of one's electricity requirement year in, year out. To put it another way, each square metre of installed PV on a roof saves more than 1 tonne of carbon emissions from fossil fuel energy over its projected lifetime of 20 years.
There are severe impediments. I have already mentioned the cost, which largely derives from the lack of the economies that large scale production brings. At present, to install solar tiles producing 2,000 units a year would cost about £8,000. I believe in putting my money where my mouth is. I am actively investigating the feasibility of installing PV tiles on the south-facing roof of my own home, but the installation cost currently means that, despite my inflated salary as a Member of Parliament, I must act from political commitment to do that now, rather than from the reasonable economic self-interest to which an economically viable industry should work.
The installation cost is further exacerbated by a regime of energy charging and payment that can be described only as acutely discouraging. It is possible for small producers to receive payment for supply to the national grid. Wind turbines and other renewable programmes work on that principle, but the regime for PV is uniquely punitive.
If one has a PV roof installed, one will consume energy from the grid at some times of the year, such as during the winter. In summer, one is likely to supply substantial amounts of energy to the grid, but one will face two hurdles. First, electricity companies require two meters to be installed at considerable cost, although the technology exists to install a two-way net meter at a much lower cost. Secondly, one pays five times as much for energy received from the national grid—for example, during the winter—as one is paid for supplying it during the summer. Not surprisingly, therefore, the equation does not balance very effectively at present.
§ Mr. Gareth R. Thomas (Harrow, West)My hon. Friend is making an excellent case. Is he aware of the German electricity feed law, which in some of the Lander guarantees a rate for electricity from renewable sources of up to 90 per cent. of the price of electricity sold through the grid? Is that not in stark contrast with the attitude of British companies? Would not a sustainable energy agency help to resolve such difficulties?
§ Dr. WhiteheadI am delighted to hear that telling point from my hon. Friend, who I know will shortly present to the House a ten-minute Bill on the subject.
In Germany and other countries, the ratio of energy supply to energy receipt is much more balanced. The situation in the UK resembles nothing more than a rip-off by the electricity companies, if I may use the vernacular.
If we discount the high hurdles that my hon. Friend illustrated by reference to other countries, there are compelling arguments for the inclusion of PV as an early rather than a late entrant to the armoury of a UK renewables programme.
§ Mr. David Drew (Stroud)I was fortunate to hold a consultation meeting last Friday on the Government's renewable energy paper, which was well received. I noticed that there were advocates for wind energy and 264 for hydro-energy, and that they were well organised. Although everyone present was in favour of photovoltaic energy, there did not seem to be the same organised effort to get it into play.
§ Dr. WhiteheadMy hon. Friend makes an important point. There are relatively powerful advocates of various kinds of renewable energy. One of the attractive and powerful features of the consultative document is that it demonstrates how a mesh of different forms of renewables can make a contribution together. My point tonight, which I think is shared by my hon. Friend, is that photovoltaic energy seems to have been left behind, to the detriment both of the development of the British PV industry, and to the contribution that it can plainly make to the future of renewables.
It will take some imagination on the part of Government to put PV back on the starting line of a good quality UK renewables programme. That imagination is needed to create the climate whereby such an outcome could be achieved and business, unlike that in other forms of renewables, would simply and quietly proceed. There would not be anguished discussions about the intrusion of turbines on the landscape, the damming of a beautiful valley for headwater or the ecological effects of a monoculture for biomass generation. A large number of roofs would simply change colour over time, from red to dark brown.
What imaginative measures are needed? First, the regulator could easily and simply require that a level playing field for PV-supplied electricity should be established through a fair remuneration policy and a net metering regime. That in itself would transform the economics of PV installations. In that context, I am greatly encouraged by the positive reply to a written question that I received today from the Minister, and I thank him for that.
Secondly, we are not at an experimental stage with PV. Welcome though the 100 roofs programme is, as an advance on nothing, do we need to demonstrate the technology? Perhaps we should instead place more emphasis on underwriting the move away from pilots towards large scale production which would, in itself, produce the economy of operation needed for long term United Kingdom viability. Installation grants and guarantees in respect of a larger number of roofs are perhaps the best way to develop capacity in the long term.
Thirdly, we need long term support for the development of the United Kingdom PV sector. A modest target for United Kingdom companies to have 15 per cent. of the world PV market by 2010 would provide an enormous and ultimately self-sustaining boost to jobs and production in this country. Government research and development and production support would be, and should be, short term and finite. The key is to boost and mature the United Kingdom's position, not to subsidise it eternally. The most immediate way of achieving that would be to include in future non-fossil fuel obligations a specific tranche for PV—perhaps 10 per cent. of the total.
Fourthly, we need to recognise that our energy supply is heavily subsidised, and has been over a long period. Between 1990 and 1995, £4.6 billion went to subsidise fossil fuel and an astonishing £ 11 billion went to subsidise nuclear power. During the same period, only £0.3 billion, or only 2 per cent. of all subsidies, went to renewables. 265 A modest redirection of short term subsidy—perhaps aimed at solar mortgages at reasonable rates, installation grants or value added tax reductions on installations—would give a cost-effective push to the establishment of clean energy in a way that subsidies to energy production have signally failed to provide to date.
Generally, an exemption for renewables from the proposed energy tax would be a great help to the successful development not only of photovoltaics, but all renewable energy sources. The ultimate benefit would be a power source that would be taken for granted but would be entirely sustainable. It would be no great adventure to install units on roofs as houses were built and it would be unremarkable that shops, garages and office buildings had unobtrusive PV generators built into their fabric.
That is the case with a few pioneering buildings in the United Kingdom and a good example, which is close to my home, is the 7.2 kW installation on a new building on the Highfield campus at Southampton university. The building is remarkable because it is remarkably like an ordinary building. BP will shortly install similarly unremarkable PV generation capacity on the roofs of all its service stations.
By backing PV alongside other renewables, we would achieve the best outcome —a sustainable society that would look and feel like society does at present. We would still live a pleasant and sophisticated urban life with all that goes with it. The difference would be that we would be using our urban environment to make that life possible rather than depleting the rest of our world through the demands that our urban living makes on it.
§ The Minister for Energy and Industry (Mr. John Battle)I sincerely thank my hon. Friend the Member for Southampton, Test (Dr. Whitehead) for securing the debate. In the House and elsewhere, he is proving to be a champion of solar power, and photovoltaics in particular, and I welcome other colleagues who have stayed to join in tonight's debate. Although we have had one or two debates on renewable energy, I think that this is our first on solar energy. I am absolutely sure, however, that I will not be able to give him all that he asks for. In all sincerity, I urge him to continue to champion this example of renewable energy.
I represent inner-city Leeds and live in one of my constituency's terraced houses. I dream of the day when we can use solar power to heat our homes. We have fewer centrally heated homes than any other constituency in Britain. Fuel poverty is a massive problem, and I think that if we can crack it we really will have the energy efficiency and home warmth that we envisage for the future.
The role of sustainable development is clear. That includes tackling what some would call not climate change, which is too benign a term, but climate destabilisation. The subject arose at a meeting with the International Energy Agency only today. Climate destabilisation will cause a massive on-cost as people pick up the bills for floods, rising tides, storms and so forth. We should aim for economic, social and environmental objectives simultaneously, so that we can meet environmental imperatives while also providing the 266 energy services that people need at a reasonable cost. The challenge will necessitate the use of certain technologies involving new, alternative and renewable sources of energy, as well as combined heat and power.
I do not want to set one renewable energy source against another. Energy from wind, water, biomass and waste, and solar energy can blend in local communities to provide precisely the mixture that is needed for the future. Renewable energy will contribute to the meeting of our Kyoto commitments, and our Government's targets for the tackling of carbon dioxide emissions and greenhouse gases.
I am proud to say that, under our presidency of the European Council of Ministers, I chaired the Energy Council. We put the renewables paper on the agenda. We are bringing renewables in from the margins. It may be said that we are doing so in too modest a way, but we are getting there. What is certain is that new and renewable energy sources are essential components of any cost-effective climate-change strategy.
As well as considering the possible contribution of renewables to sustainable energy supplies, the review that I launched assessed their potential contribution to the meeting of future greenhouse gas reduction commitments—in particular, our target for a 20 per cent. reduction in carbon dioxide emissions by 2010. Our 10 per cent. renewables target alone could lead to a reduction of some 5 million tonnes of UK carbon dioxide emissions, a valuable contribution in itself.
We already generate 2 per cent. of our electricity from renewables, and we are on target to achieve 5 per cent. by 2003. The fifth non-fossil fuel obligation round of the 261 projects involves consideration of onshore and offshore wind generation; it also features examination of biomass and wave technologies. Such techniques could take us beyond the 5 per cent. target, and towards 10 per cent.
Let me point out to my hon. Friend, and to my hon. Friend the Member for Harrow, West (Mr. Thomas), that there is a difference between the non-fossil fuel obligation—which is a price support system for people who build new power stations to generate energy—and grants that people need to make their homes more energy-efficient. I am not sure whether the NFFO mechanism is the right one.
I announced in the consultation paper that accompanied the new and renewable energy paper that the funding of our research support programme would increase from the present £l11 million a year to £18 million a year in three years, totalling more than £43 million over the period. That will reinforce our attempt to promote renewable energy sources.
We do attach importance to technologies such as PV, the use of fuel cells and wave energy, and I believe that they will make a significant contribution. We are not attempting to neglect or overlook them. However, the work that has been done under the Department of Trade and Industry programme has been aimed at assessing PV technology, and dealing with some of the barriers to its introduction and development. The Foresight Scolar programme has evolved, installing PV in more than 100 schools in an effort to gain experience of installation.
I think it fair to say that there has been support for solar technologies over the past 20 years. We have doubled the budget for PV to £1 million. What we have discovered is 267 not that it does not work; it does. The technology is there, and we know how to make the equipment. The key issue is that this form of energy costs too much in Britain when it is competing with other forms of energy in the market place. That is the real challenge.
My hon. Friend asks how we can get the costs down when that cannot be done through a mass market. I am not sure that I could convince my right hon. Friend the Secretary of State for the Environment, Transport and the Regions, or my right hon. Friend the Minister for Local Government and Housing, that there was a quick and easy way for everyone to be given a £12,000 grant to install such systems in their homes immediately.
The Treasury is considering other energy efficiency measures. It is not that the technology is not viable: it can do the job. The key question is how we get it into homes, such as the terraced houses in my area, at a price that people and the Government can afford. At present, it is too expensive for general application in the United Kingdom, although I think that it will make a significant contribution in the future.
A typical 2 kW system on a domestic roof would cost between £10,000 and £15,000, which, over the lifetime of the system—20 to 25 years—would work out at about 35p to 50p a unit compared with the present retail price to the consumer of 7p to 8p a unit. That cost will come down as standardised systems are developed and efficiencies of bulk production come into play, but from the evidence we have it is likely to be at least a decade before PV is price competitive with other sources of energy and other energy efficiency measures.
In the domestic sector, periods of maximum supply do not match periods of demand, so there is not the scope for off-setting savings compared with gas condensing boilers and the like.
NFFO is not the ideal model, and we must try to get through the barrier of costs. The purpose of the programmes that the DTI is introducing is not to assess the technological aspects of PV, but to consider the financial and market barriers to introducing it now. Can we get it into the marketplace and reduce the cost within the next decade?
We have a programme that has funded studies to tackle the barriers, we have established guidelines for the building industry on the testing, commissioning and monitoring of PV systems, and we have produced technical guidelines for grid connection of small PV systems and a design guide for building integrated PV. The programme has already funded installations in Northumbria university, Dr. Roar s eco-house, the solar panels at the Ford factory at Bridgend, which I have seen, and the Doxford solar offices. We keep pushing the theme, so that it catches on in that sector of the market, and that is starting to happen.
In February, at a conference in Manchester, I announced three initiatives that will take our support for PV up to a new level. They involve an investment of £15 million over three to five years, some £5 million of which will come from my Department. First, we have called for proposals for the development of PV components and systems. That will be an extension of the work already funded, but will be concerned with hardware development rather than paper studies. We want to get the technology into the developmental stage. That budget will be about £1 million, and projects will get between 268 25 per cent. and 50 per cent. of the total cost. They will involve collaboration between small and medium-sized enterprises.
Secondly, we have set up a field trial of about 100 homes across the country, mainly involving new build, to test the installations under UK conditions and to consider sizing of systems, types of building, different technologies and the difficult grid connection and metering issues to which my hon. Friend referred. We hope to produce from that a builders' design manual for a large-scale domestic demonstration programme.
The third initiative is the design of a scheme for demonstrations of PV in large-scale building applications. The idea is to establish best practice, and to use the buildings as a showcase for UK technology and design.
I am often asked to compare our schemes with programmes elsewhere. I have asked my counterparts how they are getting on with their projects. In the United States, the programme for 1 million solar roofs involves solar heating systems, not PV. That needs to be said, because Congress has not voted for grants to be given. In Germany, the 100,000 roofs programme is in the form of soft loans to cover 40 per cent. of the costs, so householders have to pay back the loan and raise the other 60 per cent. Their domestic energy costs are high, so it is slightly more price competitive for them to go into solar systems. I am not ruling out such programmes, and I am happy to consider financial models to see how we can get the investment. Lastly, the Japanese sunshine programme has not yet started to meet its ambitious targets because of the recession and, I am told, people's desire to hang on to their savings at present.
My hon. Friend the Member for Test mentioned the subsidies under the previous Administration to the nuclear and other industries. I say only that there are no subsidies now. We have picked up the tab for cleaning up and decommissioning the nuclear industry, as well as paying out in relation to the legacy of the coal industry, but there are no subsidies to switch directly. I make that plain: I cannot offer to redirect subsidies because they are not there to be redirected. The situation has radically changed.
I have been closely following progress with building-integrated PV. As I have mentioned, we are supporting that where we can. I recently visited the Centre for Alternative Technology in Wales, where there are directional PV rays, which enable people to crack the problem of non-south-facing homes, so the technology is moving on. It is a case simply of having the capacity to crack the problem of the financial instruments. My hon. Friend the Member for Test mentioned the notion of solar mortgages. Let us explore that in more detail in the light of his comments. I am more than happy to look again at the question of two-way net metering.
My hon. Friend said that 80 per cent. of people in our society live in cities. It is thus an urban challenge. It is a challenge for houses and terraced streets. In Britain, many homes do not get knocked down and rebuilt; it is a refurbishment problem. As well as looking at using PV in new build, I want to look at how we can use it in refurbishment projects, so that when, for example, there is enveloping of whole terraced streets across the roofs, PV is part of the whole infrastructure.
269 That will mean looking at grant and mortgage arrangements differently, and at the funding of housing associations differently, but what my hon. Friend the Member for Test has done tonight, along with colleagues, is to insist that we inject some longer-term vision into the practical possibilities. I am more than happy to continue to work with colleagues on that agenda.
The key role of renewables will be in the medium and longer terms. Over time, we will have to reduce our dependence on fossil fuels. We will need to turn increasingly to energy efficiency and non-fossil sources.
270 We hope to meet the 10 per cent. target by around 2010. We think that we can achieve that, but it is a modest starting point. We will have to move on a lot further than that as we move into the 21st century. PV will then come into its own.
Recently, I was encouraged when I visited a company that makes PV on a small scale. It is undertaking a development project—
§ The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at twenty-eight minutes to Eleven o'clock.