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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Amendment, by leave, withdrawn.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:


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.

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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".

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The main thrust of the Royal Commission's report is that we will not achieve the reductions in CO 2 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".

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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 CO 2 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".

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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.

21 Jun 2000 : Column 366

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.


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