§ DETERMINATION OF PERFORMANCE STANDARDS BY AUTHORITY
§ After section 43 of the 1989 Act there is inserted—
§ "Determination of performance standards by Authority.
§ 43A.—(1) The Authority may from time to time—
- (a) determine such standards of performance in connection with the selling of electricity by suppliers to consumers as, in its opinion, ought to be achieved by them and is consistent with their licence conditions;
- (b) arrange for the publication, in such form and in such manner as it considers appropriate, of the standards so determined; and
- (c) arrange for the publication, in such form and in such manner as it considers appropriate, or an assessment of which suppliers, in its opinion, are failing to meet those standards.
§ (2) Where a supplier has failed to reach the standards set out in this section, the Authority may order that supplier to pay compensation to the consumers affected.
§ (3) It shall be the duty of every electricity supplier to conduct his business in such a way as can reasonably be expected to lead to his achieving the standards set under this section."").
§ The noble Baroness said: In moving Amendment No. 230A, I shall speak also to Amendments Nos. 231A, 266A, 266B and 267A.
§ This group of amendments relates to the misselling of gas and electricity. They derive from the concern of the citizens advice bureaux throughout the country at the large number of misselling cases with which they have had to deal. Two different sets of problems are dealt with by the amendments. The first set arises from the choice consumers now face from the multiplicity of and from knowingly or unknowingly being switched from one supplier to another and then having difficulty cancelling contracts. In particular, the CABs are concerned about vulnerable people being pressured and misled into switching suppliers. The second set of problems arise from landlords selling gas and electricity supplies at inflated prices.
§ Let me deal first with the problems that arise from the sheer multiplicity of suppliers. A range of different problems arise. First, there is a problem of suppliers being switched without consent. A number of 357 examples can be given. For example, a citizens advice bureau in London recently reported the case of a client on jobseeker's allowance who came into the bureau because he had suddenly started to receive electricity bills from a different company. He was emphatic that he had not signed up with the new supplier because he had been out of the country for approximately nine months visiting his family in Bangladesh.
§ Another citizens advice bureau in the north of England reported the case of a client who found that his supplier had been switched after he signed a form which he was told was to confirm that his meter had been read. This is a difficult issue where people are switched from one supplier to another without realising that they have given their consent or, in some cases, without giving consent at all.
§ Other cases arise where vulnerable people are treated inappropriately. A citizens advice bureau in the North West reported that a client who was profoundly deaf and with limited speech was visited by a doorstep salesman who wanted her to change supplier. She did not understand what she was being asked to do and felt that she was misled into changing supplier. It then took almost three months to restore her original supplier and sort out the billing problems that arose from the transfer.
§ Another example arose in London, where a client of one of the bureaux with severe mental illness was misled into signing a paper confirming the visit of a sales agent but which was in fact a contract. The client was paying for fuel direct—an arrangement that would have been jeopardised had the bureau not intervened.
§ Further problems arise with the cancelling of contracts. The citizens advice bureaux have seen a significant number of clients who are finding it difficult to cancel contracts in line with their right to do so. One bureau in the South East reported a client who had come into the bureau after finding it impossible to cancel the contract to switch supplier within the cooling-off period. The company continued to send him bills and made it extremely difficult for him to cancel the contract.
§ Finally, there is the issue of poor administration. Again, there are examples of people having difficulties. A man over 85 years of age and partially blind and deaf had chosen an alternative electricity supplier. His existing supplier confirmed the cancellation of his contract in the spring of 1999. He then came into the citizens advice bureau seven months later, since he had not received any bills from anybody and was becoming extremely worried about the accumulation of his bills. His new supplier had no record of the fact that it was supplying him.
§ In another example, a bureau in the north of England reported the case of a client who, having changed suppliers, continued to receive bills from both the old and new suppliers for nearly a year. He eventually visited the CAB in frustration, having received debt recovery actions from one of the 358 suppliers. All these examples illustrate the difficulties being faced by people these days in relation to these matters.
§ In theory, the providers' licence conditions are intended to prevent companies from using such improper sales techniques. The licences are intended to provide a simple way of cancelling a contract when a customer changes his mind after further consideration. But, in practice, the regulator has taken action to enforce compliance under the licence conditions on only two occasions.
§ The CAB advised over 140,000 people on utilities issues in the year 1998 to 1999. Many of those clients are low income earners and may be among groups who experience discrimination and consequent disadvantage through, for example, age and disability. It is particularly important for these clients that the sales techniques of gas and electricity providers should not exploit the complexity of and unfamiliarity with the products they are offering.
§ If the licence conditions were being effectively enforced by Ofgem, these problems of misselling would not have to be raised so often with the citizens advice bureaux. Ofgem has recently said that it will come down very hard on companies who break the licence conditions. However, it is not clear what trigger will be used to initiate such action. It needs to be made clear to all concerned parties that the regulator will ensure that sanctions are put in place in relation to misselling. The CAB evidence indicates the necessity for such sanctions.
§ The purpose of the first two of these amendments is to put this matter right. Their aim is to beef up the regulator's powers; to ensure that GEMA, in its new form, sets minimum performance standards; to ensure that they are published; and to ensure that a naming and shaming procedure is in place for those undertakings which do not meet minimum performance standards. In addition, they provide for compensation to be paid to those who have suffered. Those are the issues which arise from the problems of choice and the misselling of electricity.
§ The second set of amendments arises from the on-selling of gas and electricity. The current provisions preventing landlords from selling on such services at inflated prices have failed, due to inadequate enforcement powers. If this overcharging is to be brought to an end, the provisions will have to be reformed and strengthened. Amendments Nos. 266A, 266B and 267A are aimed at probing this particular issue. The amendments are intended to allow the regulator or the trading standards official to pursue resale problems in cases where tenants are unable to pursue the problems themselves. I beg to move.
§ Lord McIntosh of Haringey
Like the noble Baroness, Lady Sharp, I shall first discuss Amendments Nos. 230A and 231A and then move on to the other three amendments.
I was glad to have the opportunity of hearing about the examples which the citizens advice bureaux have given of bad practice in the supply of utilities.
359 However, I have to say that there is nothing in the noble Baroness's amendment which is necessary to increase the powers to impose standards of performance under existing sections of the Electricity Act or under the new clauses to be inserted into that Act and the Gas Act by this Bill. Section 39 of the Electricity Act (as amended by Schedule 6 to the Bill) will allow the authority to set standards of performancein connection with the activities of electricity suppliers so far as affecting customers or potential customers of theirs".This clearly encompasses any standards of performance which could be set under the clauses proposed in these amendments. In addition, the noble Baroness will recall that earlier today we dealt with the question of deemed contracts when there is a change of supplier.
The existing clauses in the Bill require the authority to consult before setting standards of performance, so that there will be an opportunity for organisations concerned about misselling to suggest standards of performance in this area. That, of course, includes citizens advice bureaux and the examples which the noble Baroness, Lady Sharp, has provided in this debate. I am sure that Ofgem will have heard what the noble Baroness has said.
In addition, there already are licence conditions on how companies sell electricity. The regulator is under a duty to take enforcement action when these conditions are breached. In future, contraventions of the conditions could also lead to the imposition of financial penalties on the licence holder concerned.
With regard to publication powers that are proposed as part of the new clauses, Clauses 20(4) and 20(5) place the Gas and Electricity Consumer Council under a duty to publish such statistics as it thinks appropriate relating to levels of performance in relation to standards of performance, including any standards of performance concerned with misselling. This duty is unqualified by any consideration of the harm that such publication may cause to the companies concerned.
I do not minimise the concerns behind these amendments. It is clear from the examples given by the noble Baroness, Lady Sharp, that much is to be desired in relation to the way in which some electricity companies supply electricity to their consumers. However, the Bill provides for no fewer powers than she would add to it by these two amendments.
I also recognise the motivation behind Amendments Nos. 266A, 266B and 267A, but I do not believe that in practice they would improve the lot of those whom they are designed to assist.
Let me outline what would happen under the Bill, as drafted, if a customer discovered that he or she was being overcharged by a landlord. It is very difficult, of course, to get people to complain in the first place. Landlords are in positions of authority over tenants and many tenants have difficulty getting past the first barrier of expressing a desire to complain. If a consumer is prepared to take action personally, the powers under Clauses 72 and 101 allow recovery of the 360 sums which have been overpaid, plus interest. If a consumer feels that he needs assistance because he is afraid to raise it with his landlord, the correct body to approach would be the new Gas and Electricity Consumer Council, rather than the authority or trading standards officers. That does not mean that the citizens advice bureaux, local authority advice bureaux and others do not provide a very valuable service.
The council has a duty to investigate complaints and will be able to insist that the reseller, in this case the landlord, provides it with information relevant to the complaint. It will seek a satisfactory outcome by making representations to the reseller. But if this was unsuccessful and the consumer took his landlord to court, it would be open to him to utilise arguments, reports and so on prepared by the council as part of his legal case. I hope that that will occur only in extreme circumstances and that it will not occur often. However, those powers exist.
The Gas Consumers' Council has in the past played an active and successful role in advising tenants on their rights in maximum resale price matters. There is, for example, a booklet which is sent to tenants who are considering making a complaint which can be passed to landlords. The Gas Consumers' Council has corresponded with resellers on behalf of consumers. The new council will pick up this important work on behalf of consumers both of gas and electricity but with the valuable new ability to insist that the reseller provides information relevant to the complaint.
There is no need to revise Clauses 72 and 101 for the purpose of giving the council a role in maximum resale prices. It has this role already by virtue of the powers and functions set out in the Bill. We do not see any need to enable the council itself to receive overpayments on behalf of consumers. It is enough that the council has the duty to investigate complaints and to make representations and provide other assistance on behalf of the consumer. The remit of the council includes exempt as well as licensed suppliers, and so covers landlords, who are likely to be the suppliers in this sort of case.
Also, conditions can be placed on exemptions similar to licence conditions. Failure to comply with exemption conditions could lead to the withdrawal of the exemption. For example, a caravan site which overcharged caravan owners could lose its exemption and its power to intervene between the supplier and the ultimate consumer. A landlord who continued to supply without a licence or exemption would be committing a criminal offence. We have not concluded our consideration of what conditions should be applied to exemptions but they will almost certainly include an obligation to supply information on request to the consumer council in relation to any complaint it is investigating. I hope that if a consumer sought assistance from the authority or from trading standards officers or from the CAB, he would be redirected towards the consumer council.
I entirely accept the motivation behind the amendments. I am grateful—the consumer council and the authority will also be grateful—for the specific 361 examples which the noble Baroness, Lady Sharp, adduced in support of the amendments. However, I hope that she will accept that the powers that she seeks are already available.
§ Baroness Sharp of Guildford
I am grateful to the Minister for his detailed reply on these two issues. One of the problems that has arisen in relation to misselling is that while it is recognised that Ofgem has powers, it has used them little to date. It would be good to see it using those enforcement powers rather more rigorously than it has. The new consumer council will have stronger powers of publication and I hope that it will use those powers to name and shame those who missell.
It is a jungle for all consumers. I do not know whether other noble Lords have, like me, been rather amazed at the number of offers that are available and are not clear about what represents good value and what does not represent good value. One can see that this is a big problem, particularly for the more vulnerable groups in society.
As regards misselling, the Minister is quite right to say that there is an imbalance between the position of the landlord who is selling the product at an excessive price and that of the tenant whose only recourse is to go to court. It is good to hear that the new consumer council will have increased powers in relation to such landlords. I hope that publicity will be given to those powers and that the CAB will keep the consumer council informed of events. I also hope that the consumer council will ensure that those who offer advice in the CABs are aware of those powers. In view of the reassurances I have been given, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Clause 95 [Licence enforcement]:
Lord McIntosh of Haringey moved Amendment No. 231:
Page 99, line 6, leave out ("and (4)") and insert (",(4) and (6)").
§ The noble Lord said: I spoke to this amendment with Amendment No. 204. I beg to move.
§ On Question, amendment agreed to.
§ Clause 95, as amended, agreed to.
§ [Amendment No. 231A not moved.]
§ Clause 60 agreed to.
§ Clause 96 agreed to.
§ 9.15 p.m.
§ Clause 61 [Obligation in connection with electricity from renewable sources]:
Lord Kingsland moved Amendment No. 232:
Page 62, line 7, leave out from beginning to ("an") in line 8 and insert ("electricity suppliers").
§ The noble Lord said: In moving Amendment No. 232, I shall speak also to Amendments Nos. 233 and 234. These are probing amendments in regard to obligations in relation to renewables.362
§ Clause 62 allows a renewable obligation to be created; it leaves it open to the Secretary of State to decide upon whom and for what the obligation is imposed. These amendments seek to remove that discretion and to make all suppliers liable to meet the obligation. I should emphasise that the motive for these amendments does not in any way undermine the Opposition's commitment to the measures being introduced to achieve environmental goals and to supporting the development of renewable sources generation.
§ As currently drafted, the renewables obligation will favour those companies which operate at both ends of the supply chain, owning both supply and generation facilities. Smaller supply companies by contrast, including the innovative new entrants who have brought so much to the market place, could be squeezed out. Vertically integrated companies have the additional generation margin to fund such investment and, by doing so, they could gain significant commercial advantages. In effect, the current approach will compromise the commercial position of independent supply businesses compared with the vertically integrated players.
§ These amendments will ensure that the renewables obligation is applied equally to all suppliers; and that the application of the obligation will not distort competition between suppliers. I beg to move.
§ Lord Jenkin of Roding
Amendment No. 235, which stands in my name, is grouped with the amendments of my noble friend Lord Kingsland. The Minister will remember that I raised the issue of the renewables obligation at Second Reading and that I promised amendments; this is the first of the amendments to which I have put my name. I shall not repeat the arguments that I used at Second Reading, but I cannot be quite as brief as my noble friend has been in moving his amendment.
I should like to remind the Committee of what lies behind the amendment. If generators from renewable sources are to meet the targets the Government have set—we shall come to the question of the targets in a moment—they must be able to do two things: they must be able to borrow to finance investment in existing technology for renewables; and they must be able to finance the research and development which will be necessary if the additional sources of renewable energy are to become effective. The fear of those concerned with this issue is that, as it is drafted, the new scheme in the Bill will achieve neither of those objectives.
Since we last debated the Bill we have had the report of the Royal Commission, which was referred to by the noble Lord, Lord Ezra. Although I cannot claim to have studied it in detail in the couple of days that I have had it in my hands, I have read the parts of it which deal with renewables. The Royal Commission makes some fairly strong recommendations—not least at paragraph 7.106, which states:We recommend that longer-term targets be set for expanding the contribution from renewable sources well beyond the 10 per cent of electricity supplies to cover a much larger share of primary energy demand".363 The main thrust of the Royal Commission's report is that we will not achieve the reductions in CO2 unless we take a good deal more vigorous action as a nation and set an example to Europe—and one of those examples is in developing renewables. In Box 7D, in the same chapter, there is an interesting and helpful description of the proposed renewables obligation. It reinforces the point that,To enable companies to plan ahead the period of the obligation is expected to apply until at least 2025".There is a distinction to be drawn between the period of the obligation and the terms of the contracts which the suppliers may negotiate with those who provide energy from renewable sources, and, over the page, it goes on to draw a distinction. It draws attention to the Government's own classification of new and renewable energy technologies.
Those that are near term include biomass residues—which I mentioned in the debate on Second Reading—as well as landfill gas, onshore wind, hydro and what is known as passive solar. As regards the medium term, offshore wind and energy crops are added to the list. In the longer term we reach some of the proposals mentioned in the earlier amendment: fuel cells, photovoltaics, wave and photoconversion. In the very long term we shall see hydrogen, tidal barrage and geothermal hot dry rock.
These technologies are not going to be developed quickly. Indeed, the essence of the conclusions of the Royal Commission is that a great deal of work needs to be done before such longer-term sources of renewable energy will be able to make a contribution.
Another document I have received since we debated the matter on Second Reading is a letter from the noble Lord, Lord McIntosh. It took a little time to get a copy of it into my hands. I do not think that it was his fault, but only a full month after he signed it did I eventually secure a copy—on the third or fourth request. He made two points, with one of which I totally agree:As we advance towards the Government's target, currently cheaper sources will almost certainly be insufficient to meet the obligation. The Government is currently considering the responses to its consultation on the energy crop scheme" —I also mentioned that scheme and I have now received a copy of the consultation.
Perhaps I may say at this point that only 14 days were allowed between publication of that document from MAFF and the closing date of the consultation—from 14th to 27th April. It has become a habit of the present Government; namely, to publish a consultation and then to ask for responses in a wholly unrealistic timescale. Nevertheless, the consultation is complete. I shall continue with my quotation from the Minister's letter:The scheme is likely to direct support towards readily exploitable crops such as short-rotation coppice and miscanthus. This will provide the foundation for a substantial increase in the contribution of these crops to meeting the renewables obligations".The letter goes on to say:I should note that the Government is also considering the case for supplementary support for longer-term sources, such as energy crops and offshore wind, in the context of the 2000 spending review".364 Clearly, we shall need to wait for the Chancellor's statement before we learn any more about that.
My amendment seeks to give reality to what seem to me to be quite unexceptionable ambitions. Unless an assurance is given of offtake of renewable energy by electricity suppliers, those wishing to invest in renewables simply will not be able to raise the money to fund their investment.
The Minister's letter turned to that argument. Perhaps I may quote from it once more:You argued for a renewables obligation which required electricity suppliers to source a specified proportion of renewables from biomass at a fixed price on long term contracts—very similar, in fact, to the existing non-fossil fuel obligation. The Government has very deliberately taken the decision to move away from such picking of technologies"—I ask the Committee to note that phrase—and instead to adopt a market-based approach, in keeping with the Bill's market-based reforms of electricity regulation as a whole. This will allow the market to identify the most economic methods of achieving the Government's renewables target, to the benefit of the environment, consumers and the economy as a whole".However, that argument is very seriously flawed. With one breath the Government say that they are willing to use grant aid—a scheme is promoted and is the subject of consultation—to support renewables. But what is grant aid if it is not a form of picking winners in order to be able to distribute the grants? Yet in the succeeding breath the Government say that they cannot pick different technologies, as required in my amendment, because it would interfere with the market. I hope the Minister will take note that there is a complete logical inconsistency in that proposition. Both grant aid and picking technologies amount to public expenditure. That is because the Treasury has ruled that any additional electricity costs associated with climate change rather than with electricity supply have to be treated as costs.
The question is: which method will deliver the greatest amount of CO2 reduction per pound of public expenditure. The additional administration of setting up a grants structure, together with the normal market response of industries which are dependent on grant aid—which leads to a form of cost inflation—is inherently unlikely to deliver better value for money. I am not in the least surprised to learn from the trade press that there have been calls for the DTI to find, not £50 million, but £150 million per annum for renewable energy grant aid. How many schools or doctors could be funded with that kind of money?
In contrast, my amendment places the additional cost of renewable energy fairly and properly where it belongs: on the electricity consumer. That accords with the well-established and widely respected "polluter pays" principle. It sends the right price signals about energy usage direct to consumers, exactly as was envisaged in the Government's own policy statements in New and Renewable Energy: Prospects for the 21st Century. The document states:The Government believes that the additional cost of generation from renewable sources, whilst kept to a minimum, should be met directly or indirectly by electricity consumers. This would ensure that the costs of addressing environmental problems caused by electricity are met by those who create the demand".365 That is completely right and proper. Yet, with great respect, that is not the scheme in the Bill. It would be the scheme were the Bill to be amended in the light of my proposal.
I am sure that Ministers will be aware that the availability of near-market generating capacity is limited. The Government will be pushed for time to get the requisite reductions from renewable sources to meet their 10 per cent commitment. The near-market technology is limited by availability of resources and by the very considerable problem of planning consents, about which the Royal Commission has a number of useful things to say.
In anything but the short term, there will have to be further contributions from biomass and from offshore wind if there is to be any chance of meeting the Government's targets. It takes four or five years to plan, finance, build and bring on stream a significant new electricity generating station. It is likely that, without an obligation to purchase electricity from these technologies from the outset, sufficient time will not be available to bring the generation on line and the Government's target will not be met. If it is not, we shall be in breach of our obligations under the Kyoto accord.
The Government have recognised over and over again that the purchase contract lies at the heart of the financing of renewable energy. Perhaps I may quote another government publication which makes that point extremely clear. In financing renewable energy projects, published earlier this year, the Government state:The contract is the cornerstone of most renewables projects. The power purchaser must be creditworthy. Lenders will want the contract term to extend beyond the term of the loan. The contract will be assessed by the lenders for its economics and conditions that might cause early terminations—lenders will want the ability to cure any defaults rather than face termination".Again, that is absolutely right—but, with great respect, that is not what is in the Bill. I find it depressing that the Government have committed themselves to the two propositions that I have quoted from their own publications, and both are ignored in the Bill.
It must be recognised that, if we are to make any progress in achieving our renewables obligations, there must be longer term contracts, and there must be discrimination between the different forms of renewables. At the present stage, the prices at which the different forms of renewables can put electricity into the market are very different.
The Government must look at this again. I do not say that my amendment is the only way of dealing with the matter, but I say with all the force that I can command, reinforced by the Royal Commission, which supports the new system, that it must be on the right terms. It is not on the right terms, and my amendment is one of the ways that could put that right.
§ 9.30 p.m.
§ Baroness Sharp of Guildford
From these Benches we give our support to the noble Lord, Lord Jenkin of Roding, and his amendment. The noble Lord speaks a great deal of sense. He is absolutely right that we stand very little chance of meeting our Kyoto commitment to the 10 per cent renewable target by 2010 unless we move very quickly. We do not have the capacity in place. It takes a long time to get it in place, and we need mechanisms to encourage its being put in place.
From the point of view of UK Inc. it is vital that we increase our ability to build renewable energy capacity and develop the industry. Other countries, such as Germany and Denmark, are forging ahead in this area, and we in the UK have been very laggardly. An amendment such as that proposed by the noble Lord is precisely what we need.
§ Lord McIntosh of Haringey
When the noble Lord, Lord Kingsland, says that nothing in his amendments is intended to restrict the growth of supply from renewable sources, I accept what he says, but Amendments Nos. 232, 233 and 234 would have the effect of restricting that supply. They would remove the option to place an obligation only on certain categories of supplier and require it to be placed on all suppliers.
I recognise that concerns have been expressed that the use of the flexibility to impose an obligation on some suppliers and not others could introduce unfair market distortions, but the Government's intention is quite the opposite. It is to ensure that the market works properly. Flexibility may be important in ensuring that inappropriate barriers are not placed in the way of new entry to the market.
If we had exactly those barriers that we would have if the amendments were inserted, how would we deal with new entrants to the markets? Clearly, we cannot impose a full renewable obligation on day one, not least because entrants would have no market share from which to calculate the size of their obligation. We are still consulting on that point. There is one option—it is only an option, and we shall be canvassing views on it—which would be to exempt them from the obligation altogether in their first year of operation. Whatever may be the case, the working of a market of this kind will not be possible if these artificial restrictions, particularly on new entry into the market, are to be imposed.
I find it ironic that I should be the one defending the market mechanism against noble Lords opposite. I do so because we believe that the market mechanism is the right way to approach the issue of renewables, as it is the right way to approach the other issues of consumer protection which form the basis of the Bill. The amendments that the noble Lord has put down would certainly restrict the market; they would restrict new entry to the market by creating unacceptable barriers to new entry.
I turn now to the noble Lord, Lord Jenkin of Roding. His amendment is in some conflict with his very eloquent speech, to which I pay tribute. The 367 amendment seeks to impose a feature of the old-style, non-fossil fuel obligations—fixed, long-term supply contracts between suppliers and generators—which the Government simply cannot accept. It runs counter to the entire thrust of the new obligation to move away from this sort of rigid imposition and allow market participants to sort out for themselves the most effective way of meeting the obligation.
There is nothing in Clause 61 or elsewhere in the Bill to prevent long-term contracts with renewable generators. Clearly, these contracts will be made in some cases. The difference is that it will be the market, not the Government, which decides the right terms of the contract. If the amendment in the name of the noble Lord, Lord Jenkin, were accepted, it would impose conditions for long-term contracts that might outlive the technology described so eloquently by the noble Lord. The noble Lord said that government policy did not address long-term technologies, such as biomass. However, in the context of our market-based approach we believe that the longer-term renewable technologies will also benefit.
As electricity suppliers move towards the 10 per cent target, they are likely to experience insufficient availability of cheaper renewables and will look increasingly to offshore wind and energy crops, for example, to meet their obligations. These energy sources cannot be bought in over night. It would be prudent for energy suppliers to look ahead now to ensure that the technologies are brought forward on a timescale, and in sufficient quantities, to meet their needs.
The noble Lord, Lord Jenkin, referred to the climate change levy. One possibility is to draw some funding from that levy. That was one of the issues referred to in yesterday's article in the Financial Times. Last year the Chancellor announced that £50 million from the climate change levy would be allocated to increase funding for energy efficiency, to promote the development of new sources of renewable energy and to encourage research and development and the take-up of low carbon technologies and energy-saving measures through a carbon trust. In November 1999 the Chancellor announced the trebling of support for energy efficiency measure from £50 million to £150 million to allow for the introduction of a system of 100 per cent first-year capital allowances for energy-saving instruments. Individual funding allocations have not yet been settled. The Government also made an announcement to exempt from the levy energy generated from new forms of renewable energy, such as solar and wind power and good quality combined heat and power plants.
In addition to our plans to impose an obligation on licensed electricity suppliers to supply a specified proportion of their power from renewable sources, the Government are actively considering top-up financial support for offshore wind energy and energy crops, possibly in the form of capital grants. This reflects both the higher costs of those technologies and the importance of bringing them forward if we are to meet the renewables targets in 2010 and beyond.
368 The noble Lord, Lord Jenkin, appears to believe that there is some conflict between this grant aid and the rest of our policies. No. There is a big difference between direct support for research and development and the long-term framework of the renewables obligation. I am much more sympathetic to the motivation behind the amendment in the name of the noble Lord, Lord Jenkin, than the amendment moved by the noble Lord, Lord Kingsland, which would have a very damaging effect on the renewables obligation. I am afraid that the approach of going back to the long-term contract of the non-fossil fuel obligation is not the right way to proceed.
§ Lord Ezra
In view of the fact that the Minister respects the motivation behind the amendment in the name of the noble Lord, Lord Jenkin, who says that he does not necessarily stick to the wording of his amendment, is it not possible to introduce into the order some preference for long-term contracts, bearing in mind the nature of the activity that we are talking about? The noble Lord, Lord Jenkin, is absolutely right. The thrust of the Royal Commission's report is that it will be extremely difficult for us to meet the targets which the Government have rightly set. This matter requires a good deal of long-term planning and thinking. While there is perhaps too much rigidity in the wording of the amendment, is it not possible to emphasise in the order the importance of providing long-term support for the renewables sector?
§ Lord McIntosh of Haringey
I am very dubious about the role of long-term contracts, although I am insistent about the long-term nature of our policies. After all, the renewables obligation is intended to last until 2025. Rather than respond positively in the way suggested, I invite the noble Lords, Lord Ezra and Lord Jenkin, to talk to me and my officials between now and Report stage so that where there is common ground those matters can be thrashed out and we can see whether progress can be made.
§ Lord Jenkin of Roding
Before my noble friend withdraws his amendment, perhaps I may say that I have been half encouraged by the response and very encouraged by the support of the noble Lord, Lord Ezra, and the noble Baroness, Lady Sharp.
As I said, I am not wedded to the wording of the amendment. However, I wish to emphasise that if one could encourage big industry to come in on this aspect—I do not refer to the little man with his rubbish heap or the family which happens to have a hydro facility—it could result in good, embedded energy. We want to encourage the big players, perhaps from overseas as well as our own people, to make this a major part of their investment. They are not encouraged by grants because they always recognise that they can be switched off at any moment. They are looking for an environment which will encourage them to put their money into the investment and into research and development.
369 The Minister invited some of us to have meetings with him. It would be exceedingly churlish of me not to take that up with enthusiasm; and I do. Perhaps we can explore that.
§ Lord McIntosh of Haringey
I do not want to be exclusive. The noble Lord refers to "some of us". If other noble Lords, including the Opposition Front Bench, wish to discuss these matters, I shall be pleased to do so with them as well.
§ Lord Jenkin of Roding
I am sure that we should all like to come along. I should like to bring one or two of my advisers who have helped and guided me on this issue. I have not moved my amendment; therefore I do not need to withdraw it. It has been a short and useful debate. I am grateful to the Minister for the amount of trouble he has taken with his reply.
§ Lord Kingsland
I shall be delighted to talk to the Minister about my amendment. However, after what I shall say he may not pleased to talk to me.
I think it unfair of the Minister to assert that my amendment is anti-competitive. On the contrary, it seeks to ensure that the small entrepreneur is fairly treated in relation to the rest of the market. It is a competition-enhancing rather than competition-constricting amendment. The Minister was clear about his rejection of it. In those circumstances, I should like to test the opinion of the Committee.
§ 9.42 p.m.
§ On Question, Whether the said amendment (No. 232) shall be agreed to?
§ Their Lordships divided: Contents, 29; Not-Contents, 76.370
|Division No. 3|
|Anelay of St Johns, B.||Jopling, L.|
|Astor of Hever, L.||Kingsland, L.|
|Attlee, E.||Knight of Collingtree, B.|
|Blatch, B.||Laird, L.|
|Bridgeman, V. [Teller]||Lamont of Lerwick, L.|
|Brougham and Vaux, L.||Lyell, L.|
|Buscombe, B.||Moynihan, L.|
|Carnegy of Lour, B.||Northbrook, L.|
|Crathorne. L.||Palmer, L.|
|Ferrers, E.||Patten, L.|
|Fookes, B.||Roberts of Conwy, L.|
|Geddes, L.||Stodart of Leaston, L.|
|Henley, L. [Teller]||Wade of Chorlton, L.|
|Jenkin of Roding, L.||Willoughby de Broke, L.|
|Acton, L.||Bassam of Brighton, L.|
|Alderdice, L.||Berkeley, L.|
|Alli, L.||Borrie, L.|
|Amos, B.||Bragg, L.|
|Andrews, B.||Brennan, L.|
|Archer of Sandwell, L.||Brett, L.|
|Bach, L.||Brooke of Alverthorpe, L|
|Brookman, L.||Hunt of Kings Heath, L.|
|Burlison, L.||Islwyn, L.|
|Carter, L.[Teller]||Lea of Crondall, L.|
|Christopher, L.||Lipsey, L.|
|Clarke of Hampstead, L.||Lockwood, B.|
|Cocks of Hartcliffe, L.||Macdonald of Tradeston, L.|
|Cohen of Pimlico, B.||McIntosh of Haringey, L.|
|Crawley, B.||McIntosh of Hudnall, B.|
|Currie of Marylebone, L.||MacKenzie of Culkein, L.|
|David, B.||Mackenzie of Framwellgate, L.|
|Davies of Coity, L.||Mar and Kellie, E.|
|Dormand of Easington, L.||Massey of Darwen, B.|
|Dubs, L.||Mitchell, L.|
|Evans of Parkside, L.||Morris of Castle Morris, L.|
|Ezra, L.||Nicol, B.|
|Farrington of Ribbleton, B.||Phillips of Sudbury, L.|
|Faulkner of Worcester, L.||Ramsay of Cartvale, B. [Teller]|
|Fyfe of Fairfield, L.||Rendell of Babergh, B.|
|Gale, B.||Sawyer, L.|
|Gibson of Market Rasen, B.||Scotland of Asthal, B.|
|Goldsmith, L.||Sharp of Guildford, B.|
|Gould of Potternewton, B.||Simon, V.|
|Grenfell, L.||Thomas of Gresford, L.|
|Hardy of Wath, L.||Tomlinson, L.|
|Harris of Haringey, L.||Tope, L.|
|Harris of Richmond, B.||Tordoff, L.|
|Harrison, L.||Walpole, L.|
|Hilton of Eggardon, B.||Warner, L.|
|Howells of St. Davids, B.||Whitaker, B.|
|Hoyle, L.||Whitty, L.|
|Hughes of Woodside, L.||Wilkins, B.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 9.52 p.m.
§ [Amendments Nos. 233 to 235 not moved.]
Lord Hardy of Wath moved Amendment No. 236:
Page 62, line 28. after ("sources") insert ("or from the application of clean coal technology").
§ The noble Lord said: In moving Amendment No. 236, I wish to speak also to Amendment No. 238. I do not intend to detain the Committee very long but some significant points need to be made.
§ The Government deserve congratulations on their commitment to making a proper contribution to clean coal technology. Indeed, a number of other affluent countries would do well to do so and the world would benefit from emulating our record. However, the Government's targets are ambitious. Not all British projects are dispatched effectively. I think, for example, of the repairs to the escalator on the Victoria line at King's Cross Station which seem to be taking a long time. If some of our renewable projects took as long as that, we should be in dire straits in fulfilling our obligations. But I am more optimistic about that.
§ We must consider that, although we have seen enormous reductions in the British mining industry, that which remains is exceedingly successful. The latest production figures for Richard Budge's pits—he owns the vast majority of them, as the noble Lord, Lord Ezra, will be aware—build on the contribution that the National Coal Board made under his chairmanship. The productivity rates are astonishing. Some coal faces produce 7,000 tonnes of coal a shift. A coal face maintained at that level would be a super-pit, with a 2 million tonne level of production.371
§ The noble Lord, Lord Jenkin, will recall our slight exchange last week on this. I have never been in favour of burning coal in a filthy manner. I am in favour of clean coal technology. I was bitterly critical of the previous administration, who put an end to substantial research. That research should be renewed with vigour because, although we may be reducing our coal burn and no longer puffing out noxious gases into the environment, making those changes will do us and the globe very little good if other huge coal-producing countries continue the practices that we have stopped. Given the amount of coal that will be burned in China, India and a number of other countries over the next five or 10 years, the world is clearly crying out for the new technology. We have a commercial opportunity to develop clean coal technology rapidly in Britain. It would be very useful for us and there would be international opportunities.
§ The other reason for the Government to take a favourable view on the issue is to ensure a belt and braces approach. I am more optimistic than some in the Opposition about the development of some renewables, but that could take a little time. If it takes a little longer than the Government and the industry hope, there may well be a tendency, as the target dates are reached, to take an excessively generous view of particular approaches to renewable production. It should be possible to move rapidly on biomass and we ought to make a more vigorous effort to harness the power of water, but I am uneasy about wind, largely because, although a great deal is said about it, the amount of energy produced by the wind farms now operating is surprisingly small. I pointed out in the House last week a proposed wind farm near the Yorkshire coast which would not go down well with most local people, would not enhance our landscape and would produce as much energy in a year as Drax power station, which is fitted with flue gas desulphurisation, produces in six days.
§ The noble Lord, Lord Jenkin, referred to planning consent. Those of us who have lived in coalfield areas know that in the 1980s the previous government virtually forced local authorities in areas where there were coal reserves to give planning permission for opencast mining. That caused enormous fury. As deep mined pits were closed, local people had to put up with opencast mining. I am not saying that there is no role for it—it has cleared a lot of dereliction in South Yorkshire—but no government of whatever complexion should seek to ride roughshod over the local population on issues such as wind farms. There may be a place for them offshore and onshore. But as a conservationist, I find the prospect of seeing huge numbers of birds destroyed by the windmill, as would certainly happen because of the sucking-in action which would develop, distasteful. If those windmills are built on lines of migration, the slaughter would be distasteful, especially given the relatively low energy yield which would then result.
§ I hope that the Government will accept that clean coal technology should proceed apace, not merely for ourselves but because it will help to give the world a 372 capacity to meet the obligations which the United Kingdom is pursuing and which other countries also need to meet. I beg to move.
§ 10 p.m.
§ Baroness Buscombe
I rise to speak to Amendment No. 241. That amendment concerns the granting of power to the Secretary of State to make different orders for different classes of supplier. We propose here that that power should be invoked only in a way which will not distort competition.
§ Lord Ezra
I support the two amendments dealt with so eloquently by the noble Lord, Lord Hardy of Wath. In fact, I have a later amendment which deals with the same subject. It may be for the convenience of the Committee, and perhaps abbreviate the time that we must spend, if I deal now with that too.
I agree entirely with the thrust of the remarks of the noble Lord, Lord Hardy, as regards clean coal technology. We have a very successful coal enterprise. It is much reduced compared with earlier days; nevertheless, it is successful and efficient. We have massive coal reserves and there are even greater coal reserves in the Far East and other developing countries.
The problem that we have is how to burn and use that coal to minimum environmental disadvantage. Clean coal technology offers a way of doing that if we can establish the process.
The Government have recently provided much needed short-term support for the coal industry. But long-term support must also be provided. That should take the form of stimulating the development of clean coal technology which can be done only if contracts are placed for that technology. Therefore, I fully support the case which has been made by the noble Lord, Lord Hardy, that that should he included in the obligation.
Techniques for clean coal technology have been successfully proven in laboratories, and some countries—not Great Britain, unfortunately—have development plants in operation. We really need to get such plants going. I have been working for many years to bring that about. While at the coal board, I gave support to the Grimethorpe project in the 1970s, which some may remember, which was subsequently closed down.
More recently, in 1998, I introduced a Bill,to extend the obligation to generate electricity from certain fuel sources".The purpose of that Bill was to extend the non-fossil fuel obligation, which we then had, to include certain fossil fuel projects which could contribute to environmental improvement and, specifically, clean coal technology. Although that Bill successfully passed through this House and was supported in another place by the then Minister for Energy, as well as by the Select Committee on Trade and Industry, it foundered, as do the bulk of Private Member's Bills at the present time in the other place for reasons with which most of us are familiar.
373 The Utilities Bill provides a further opportunity for creating the circumstances which could lead to one or more clean coal projects in the UK. Unless there is specific support for those projects or there is a commitment to take their production, they will not come about.
The problem for Britain will become very serious when the nuclear plants are closed down (in the period 2010–20); the whole balance of CO2 emissions will be altered by that fact. We must prepare for that now. We should be developing all the resources we can. The noble Lord, Lord Hardy, is absolutely right. While everything possible is being done to develop other renewable sources, we have here potential for the coal industry to make its contribution so long as the technologies can be developed.
So I should like to ask the Government to consider the problem in this context. I do not suppose for one minute that the amendments that the noble Lord, Lord Hardy, and I have moved this evening will be agreed; we merely put down a marker. We say, "This is an issue which should be further considered". This is one of the remaining opportunities for introducing a new technology into coal usage. I very much hope that, one way or another, we shall seize it.
§ Lord Jenkin of Roding
I hesitate to join in a debate with two such acknowledged experts on the coal industry but, for my sins, for part of my career I was both a shadow Minister and a Minister for energy and I had to deal with the coal industry at that time. I remember 25 years ago visiting the Coal Research Establishment just outside Cheltenham. There I came across a man who was working very hard on the underground gasification of coal. I do not know whether that was a "clean" technology—we did not think of it in those terms. I remember putting my arm round his shoulders and saying, "Do you realise, my friend, that you have the whole of the future of the coal industry on your shoulders?" It was quite clear that we were not going to go on burning large tonnages of coal on the surface.
The noble Lord is absolutely right; it is another country. The resources of coal are huge. I remember discussing this issue with the then head of the energy department in Beijing, Mr Qu Che Ping. They were hoping to burn 1,200 million tonnes of coal, and I said to him, "My friend, you really cannot do that". This was some years ago, long before Kyoto and indeed before Rio. They are changing their view; they are realising that that actually is not on. They are now buying more nuclear energy. We have not said anything much about nuclear energy, but if there is clean coal technology which really can generate energy without polluting the earth, clearly that needs to be encouraged and promoted.
The Royal Commission report talks a lot about what I call—although it does not—the sequestration of carbon dioxide, where the CO2 is extracted from the flue gases and put back down. The commission prefers it to be put back down under the sea, where it can 374 remain in perpetuity: it is taken out of the atmosphere. It does not know yet whether that is economic. Clearly more work needs to be done in order to achieve what is needed. I agree that if we are to meet these renewable obligations, everything has to be encouraged. I very much agree with the noble Lord, Lord Ezra, that this needs longer-term backing and preferably contracts if it is to be achieved.
§ Lord McIntosh of Haringey
Perhaps I may speak first on Amendments Nos. 236 and 238, which would provide that obligations under the renewable powers could be met by clean coal as well as renewables. Let me start by saying that we certainly are supporters of clean coal. We have a substantial support programme for clean coal technology.
The Government's policy is to encourage the development of cleaner coal technologies for application both at home and overseas. I entirely take the point made by my noble friend Lord Hardy, that research and development on cleaner coal technology will not only benefit the British coal industry but also provide huge export potential for very much larger coal industries in other countries.
The policy is being implemented in a six-year programme, which started in April 1999, linking research and development with technology transfer and export promotion. The broad aim of the programme is to provide a catalyst for UK industry to develop cleaner coal technologies and to obtain an appropriate share of the growing world market for the technologies.
The programme will encourage collaboration between UK industry and universities in the development of the technologies and expertise. It is expected that projects worth over £60 million in R&D will be generated as a result of the DTI's contribution of £12 million over three years. Through this programme the DTI will be able to contribute to a global strategy to contain the growth of carbon dioxide (CO2), a recognised greenhouse gas, in developing countries in collaboration with the IEA and OECD countries.
The principal aim of the programme is to develop advanced power generation as recommended by the industry-led Foresight Task Force and to help industry meet the Foresight technology targets. Other aims are to encourage fundamental coal science research in support of the Foresight technology targets and to examine the potential for developing the UK coal-bed methane resource and underground coal gasification technology, to which the noble Lord, Lord Jenkin, referred.
The Foresight investigation into cleaner coal technology identified a case for plant demonstration from 2005. This is the issue of the demonstration plant to which the noble Lord, Lord Ezra, referred and to which he has devoted a substantial part of his distinguished career. The Government undertook a detailed review of its cleaner coal technology programme and published their conclusions in April 1999 in Energy Paper 67. The Government undertook 375 to maintain strong support for cleaner coal R&D with DTI funding of £12 million, to which I have already referred.
Government support for demonstration projects is not seen as a priority at present, for two main reasons. First, a number of commercially proven cleaner coal technologies are available to the electricity industry from a number of technology suppliers and licensees in both the UK and overseas. These do not need to be demonstrated again on a commercial scale and subsidised by the UK taxpayer. Information about these technologies, their technical characteristics and economics is well known to the UK electricity industry should it choose to invest in them. Government support is focused on supporting R&D to develop more advanced technologies capable of offering substantial improvements in efficiency and environmental performance.
Secondly, the UK has a number of moderately efficient generating units which offer the electricity industry the option of incremental improvements to existing plant. These include the strategic installation of flue gas desulphurisation in the most heavily used stations rather than investing in new plant. Although the environmental benefits from that are not as good as those obtainable from currently available cleaner coal plant, the difference in cost is not sufficiently great to justify the very large difference in costs between the two approaches.
I have expressed, I hope in some detail, our support for cleaner coal. However, it does not follow from that that we can support the amendments. We must bear in mind the fact that coal is not renewable and the Government do not consider that it could be considered as an alternative to renewables. The amendment would spread the number of technologies which would be available for the renewable obligation. That would dilute the renewable obligation rather than add to it. At present, we have the renewable obligation, the 10 per cent obligation and the expenditure on and research into clean coal on top of that. The renewable provisions are intended to meet environmental objectives. The effect of the amendments would tend to work in the opposite direction, either by displacing renewables directly or by imposing competing demands on the purse of the electricity consumers. We therefore regret that we are unable to support the amendment.
On the other hand, Amendment No. 241 addresses a discrepancy in the Bill. There are provisions in the clauses on energy efficiency, standards of performance and licence modification which place requirements on the Secretary of State or the authority relating to avoiding distorting competition when exercising the powers. It is reasonable that renewables should be treated in that way.
Amendment No. 241 goes too far by ruling out any distortion in competition. We envisage the possibility of some difference in the obligations on new suppliers, which I referred to in discussing the previous amendments, although noble Lords opposite did not care for that. As elsewhere in the Bill, we think that we 376 should be exercising powers so that no supplier should be unduly disadvantaged in competing with other suppliers.
I accept the principle of the amendment, but I ask the noble Baroness, Lady Buscombe, not to move it. We shall come back with our own amendment at Report stage.
§ 10.15 p.m.
§ Lord Ezra
I listened with pleasure to the enumeration of the ways in which the Government are helping forward research and development in relation to clean coal technology. However, I was disconcerted by the fact that they take a different view from my own and that of the noble Lord, Lord Hardy, on when we should see a large-scale plant in operation in the UK. Until we have that, we will not have got anywhere with clean coal technology—a technology that is well known.
While more research is desirable and research always leads somewhere, the time comes when we must start producing what the research points to. Unless we can have a production plant here of sufficient size, we shall not obtain the overseas orders; they will go to those countries where such plants exist.
Furthermore, we are offered the opportunity through the obligation to introduce an element of clean coal technology. I do not agree that this proposal will dilute the obligation; indeed, it would add to and strengthen it. It would mean that we are looking widely at all our energy resources to see how we can improve the atmospheric situation. I wonder whether the noble Lord will discuss this issue with the other matters we shall he discussing to see whether we can make headway perhaps in another direction and achieve what appears to be a common objective.
§ Lord McIntosh of Haringey
I am sure that this will be on the agenda for the meetings in which we have already said we will take part with interested parties.
§ Lord Hardy of Wath
I am grateful to my noble friend. Obviously the Government are sympathetic. But there is a need for demonstration. I trust that we can discuss that matter and that it will receive favourable consideration. Given the response of my noble friend, we have taken the matter as far as we can at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ezra moved Amendment No. 237:
Page 62, line 32, at end insert—
("(3A) The renewables obligation shall ensure that 5% of Great Britain electricity requirements shall be met from renewables by the end of the year 2003 and 10% by 2010.").
§ The noble Lord said: Amendment No. 237 relates to the renewable obligation which we have been discussing at considerable length. It aims to have printed on the face of the Bill the Government's 10 per cent objective for an increase in renewables by the year 2010.377
§ We were told in informal discussions that there is no need for this amendment; that the Government are fully committed to this objective. We know that they are. But we believe that the issue is of such considerable importance that it should find its place on the face of the Bill. I beg to move.
§ Lord Jenkin of Roding
I added my name to that of the noble Lord, Lord Ezra, and in doing so I have one clear objective in mind. I have already referred to the need to finance the development of renewable resources. Generators must be able to borrow. One of the ways in which it will be possible to engender in lenders the confidence that this area has a future is by including the renewable targets on the face of the Bill. They would then be part of the law of the land. Lenders would be able to point to that and say, "That is what is going to happen" and would find themselves able to lend the money to the people who wanted to invest it.
§ Lord McIntosh of Haringey
Amendment No. 237 seeks to fix the government targets for renewable electricity in statute. The Bill gives the Secretary of State power to place obligations on electricity suppliers and sets the framework for those obligations. This amendment seeks to establish a general target on the basis of which the level of the obligations would be set. The two would not, of course, be the same because some renewables, such as large-scale hydro, will count towards the Government's target but will not count towards an obligation.
Let me make it clear, although I perhaps do not need to in the light of what the noble Lord, Lord Ezra said, that there is no question of the Government going back on their commitment to achieve 5 per cent renewable electricity by 2003 and 10 per cent by 2010, provided that the cost to consumers is acceptable. The only issue before us is whether it would be right to put such figures on the face of the Bill.
We have said that we shall consult further about how the powers under this clause will be exercised. We need to consult on the profile that, so as to reach our target, the obligation will impose on the buy-out mechanism and on the cost to consumers of achieving the obligation. To get the profile right will not be a straightforward matter. We can be sure of doing so only if we listen carefully to the responses from the wide body of expertise in the electricity industry, including the renewables industry, as well as to the views of consumers, who will be paying for it through their electricity bills.
We believe that the provision which the amendment would introduce, namely, that the obligations will ensure a particular target, is wrong in principle and that it therefore has no place in the Bill. However, that does not mean that we resile at all from our commitment to renewable energy.
Amendment No. 247 refers to recycling buy-out receipts. That is an option which has advantages and disadvantages. The primary advantage is that it is an 378 additional incentive to meet the obligation by supplying renewables. One disadvantage is that it could push the price that suppliers are prepared to pay for renewable electricity above the price cap set by the buy-out mechanism, which would impose additional costs on consumers.
The important point for us now is that the Government need to consult further on whether this or another mechanism is the right one. The order-making powers of Clause 61 allow a system of the kind that the amendment addresses, and that is where it should be—in secondary legislation, not on the face of the Bill.
Amendment No. 248 refers to using buy-out receipts as additional support for renewables. We cannot accept that argument. It would undermine the objective of recycling the receipts in the first place, which is to limit the cost to consumers in the event that renewable generation turns out to be more costly than we expect. Of course, the recycling of buy-out receipts to finance specific technologies will create a further subsidy for renewables at a price much greater than we originally intended when the buy-out price was set. If we get the buy-out price and the incentives right, the level of buy-out receipts should be fairly small, which would not be a good way to support renewables.
Therefore, with no derogation from our commitment to renewable energy, I regret that we cannot accept these amendments.
§ Lord Ezra
If we are to have a discussion about renewables, I suppose we can widen the agenda to take on board these points.
With regard to the other amendments with which I did not specifically deal, although the Minister did, the Secretary of State is due to make orders dealing with how these repayments should be made. Perhaps we can also discuss whether the ideas that are being formulated fit in with the proposals contained in these two amendments. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 238 not moved.]
Clause 61 agreed to.
§ Clause 62 [Orders wider section 32: supplementary]:
Lord McIntosh of Haringey moved Amendment No. 239:
Page 63, line 46, after ("32(6)") insert ("or in the definition of "renewable sources" in section 32(8)").
§ The noble Lord said: This is a series of minor government amendments which, with one exception, do not make substantive changes to the renewable powers in the Bill, but make technical adjustments and enable the provisions to be more effectively applied. The one exception is Amendment No. 240 to Clause 62. This states that an order may provide that, to a specified level, underachievement or overachievement in a particular period of a supplier's obligation may be carried forward into a subsequent period. I believe that that is known as "banking and borrowing".379
§ The Government are considering whether to use this power to allow for a small percentage of a supplier's under or over-achievement of his obligation in a given period (probably a year) to be carried forward into the following period. This would help to avoid potential volatility in the market for renewable electricity that might otherwise take place at the end of a period, as suppliers attempt to clear their positions. It will not allow a supplier to escape his obligation. We intend to consult further on how the power should be used.
§ Amendment No. 239 provides that an order under Clause 61 may determine how the proportion of fossil-derived material in waste that may count towards a renewables obligation is to be calculated.
§ Amendments Nos. 242 and 243 provide that a "green certificate" may be issued to a supplier as well as to a generator to provide the flexibility which may be necessary.
§ Amendments Nos. 245 and 246 provide that a different "buy-out price" may be set for different periods within the overall period of a renewables order and may be adjusted for inflation.
§ Amendments Nos. 251 to 255 provide necessary flexibility in the order-making power under Clause 66 so that an order making transitional arrangement to preserve the existing non-fossil fuel obligation contracts can he made at the same time as the implementation of the new electricity trading arrangements.
§ Amendment No. 256 allows for an order under Clause 66 to make different provision for Scotland from that for England and Wales. I beg to move.
§ On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 240:
Page 64, line 12, at end insert—
("( ) An order may, in relation to any specified period ("the current period")—
- (a) provide that evidence of electricity supplied in a later period may, when available, be counted towards discharging the renewables obligation for the current period;
- (b) provide that evidence of electricity supplied in the current period may, in a later period, be counted towards discharging the renewables obligation for that period;
- (c) specify how much later the later period referred to in paragraph (a) or (b) may be;
- (d) specify a maximum proportion of the renewables obligation for any period which may be discharged as mentioned in paragraph (a) or (b);
- (e) specify a maximum proportion of electricity supplied in any period evidence of which may be counted towards discharging the renewables obligation for a different period.").
§ On Question, amendment agreed to.
§ [Amendment No. 241 not moved.]
§ Clause 62, as amended, agreed to.380
§ Clause 63 [Green certificates]:
Lord McIntosh of Haringey moved Amendments Nos. 242 and 243:
Page 64, line 35, at end insert ("or to an electricity supplier").
Page 64, line 37, after ("station") insert ("or, in the case of a certificate issued to an electricity supplier, a generating station specified in the certificate").
§ The noble Lord said: These amendments were spoken to with Amendment No. 239. I beg to move them en bloc.
§ On Question, amendments agreed to.
§ Clause 63, as amended, agreed to.
§ Clause 64 [Alternative way of discharging renewables obligation: payments]:
Lord Jenkin of Roding moved Amendment No. 244:
Page 65, line 6, at end insert—
("(2) The Secretary of State shall have regard both to the costs of production of differing sources of renewable electricity and to the implications of fulfilment of the renewables target when setting the differing sums which are to be regarded as discharging the renewables obligation under this section.").
§ The noble Lord said: In view of what has been said already about a meeting, I can deal with this matter briefly. I listened with interest to what the Minister said on the previous group of amendments.
§ Amendment No. 244 is intended to recognise, and therefore to ask the authorities to recognise, that renewables, certainly in the earlier years, will have many different price levels. The amendment suggests that a distinction should be drawn between what one might call the low cost and the higher cost renewables. There should not be a "one suit fits all" situation.
§ In the light of what the Committee has just agreed to in a government amendment, that may already be taken into account. However, it is certainly something that needs to be discussed. Those who will have to operate the system and the "buy-out" provision—if I may describe it as that—would think it unfair that the same level of price should be fixed, whatever the gap between the normal energy price, as it were, and the higher price of the renewables.
§ I also wish to give notice—I may write to the Minister on this matter—that a number of other issues have been raised with me by a rather splendid body called the Association of Electricity Producers, which represents some of the very small producers of electricity as well as some of the rather large producers. It has been involved in negotiations with officials in the DTI and has had some difficulty in getting its points effectively listened to. The association has some very interesting points as to how it could make this market work more flexibly and more effectively. I should like to draw the Minister's attention to those points as well. I beg to move.
§ 10.30 p.m.
§ Lord McIntosh of Haringey
I am happy to add this to the agenda for our meeting. I do not fully understand the amendment. The fact that the Secretary of State was contemplating setting different buy-out prices for different technologies would imply, 381 of necessity, that he was having regard to the different costs of different technologies. By the same token, it is not conceivable that the Secretary of State would set different prices without regard to the implications for the level of renewables generation likely to be achieved as a result. But perhaps we can tease out this matter better off-line than in the Chamber.
§ Amendment, by leave, withdrawn.
Lord McIntosh of Haringey moved Amendments Nos. 245 and 246:
Page 65, line 10, leave out ("and") and insert—
("( ) for different such sums in relation to different periods;").
Page 65, line 14, at end insert ("and
( ) for any such sum to be adjusted from time to time for inflation by a method specified in the order (which may refer to a specified scale or index or to other specified data of any description, including such a scale or index or such data in a form not current when the order was made, but in a subsequent form attributable to revision or any other cause and taking effect afterwards).").
§ The noble Lord said: I spoke to these amendments with Amendment No. 239. I beg to move.
§ On Question, amendments agreed to.
§ [Amendments Nos. 247 and 248 not moved.]
§ Clause 64, as amended, agreed to.
§ [Amendment No. 249 not moved.]
§ Lord Ezra moved Amendment No. 250:
§ After Clause 65, insert the following new clause—