Finance Bill

The renewables obligation is proving to be an effective lever for raising the proportion of electricity generated from renewable sources. We have seen that rise pretty sharply over the past few years in response to the renewables obligation. There has been an animated debate in Germany about the costs of the feed-in tariff and other processes. I did not follow the election debate there closely, but I am told that that was a significant element of it. It is certainly not the consensus in Germany that the feed-in tariff measures are inexpensive. I am sure that one can present the figures in a variety of ways, but there is serious political concern about the costs of the arrangements. I am disappointed to hear that my hon. Friend has been unable to claim any ROCs for his own electricity generation. I shall take that point away and consider it. I agree that the mechanisms need to be accessible to change behaviour. There is no doubt, however, that the renewables obligation is starting to bring about the large-scale changes that we need for an up-scaling of electricity generation from renewable sources. The primary purpose of microgeneration is for people to generate their own domestic electricity, but they can, and are most welcome to, sell surplus electricity back to the national grid, as my hon. Friend has done. ROCs are available. I am confident that people are receiving those from domestic generation, although I shall check that point further. The certificates can then be sold to energy companies. However, receipt of income in that way raises the question of liability for tax. Uncertainty about the tax position has been a disincentive to the take-up of microgeneration. Clauses 20 and 21 aim to remove that disincentive. Together they ensure that householders do not face a tax bill by investing in microgeneration equipment for their own domestic use. They exempt from income tax and capital gains tax the proceeds from the sale of surplus electricity and from the receipt and disposal of ROCs. They remove the uncertainty and therefore the disincentive. I think that the House will agree that that is a welcome change. The precise value of the income tax exemption will depend on how much surplus electricity a householder will generate. A householder can expect to make between £120 and £240 a year from a wind turbine and perhaps £40 a year from a solar photovoltaic system, although that will depend on the weather conditions and the contracts that are in place. We announced in the Budget that the Government will ask the Office of Gas and Electricity Markets to examine how householders can benefit more from the prices paid to them when they export electricity to the grid. Perhaps that will give us an opportunity to address the problem of microgenerators accessing ROCs. The tax exemptions are available only for householders who have installed microgeneration primarily for their own domestic use. They do not apply to individuals who invest in microgeneration with the intention of selling surplus electricity or of dealing in ROCs as a commercial activity. That is right. The test of significantly exceeding the amount that they use themselves is simple and straightforward, and it ensures that the tax exemptions are properly targeted. It has been argued that the ““significantly exceeding”” test should be removed from both the exemptions, so widening the scope of the tax exemption to include those individuals who are seeking to make a commercial profit from domestic microgeneration. I argued in Committee, and argue again now, that that would be ill advised. The clauses provide clarity for householders who are involved in microgeneration. They ensure that unless an individual is trying to make a significant profit, he will not face a tax charge as a result of microgenerating electricity.