Renewables Obligation Order 2009

My Lords, I am grateful to noble Lords who have spoken in this debate. I detected a general welcome for the order. The noble Lord, Lord Teverson, cheered me up immediately by saying that he was very much in favour of it. I think that the noble Lord, Lord Jenkin, got there eventually as well, although his detailed questions led me at one stage to fear that the order presented more problems than its merits justify. However, we recognise the advantages that the order brings. Like the noble Lord, Lord Jenkin, I have no wish to go back to the very full debate that we had in February on these issues, nor do I want to revisit the 2008 Act too much, although there are cost references because the order is derivative from the Act. If I may, as I have quite enough on my plate in dealing with these specific questions, I will concentrate more on those than on the more general issues that were raised about the order. It fulfils the position that last year’s Energy Act set out to establish. I shall begin with the question of costs, which the noble Lord, Lord Jenkin, identified as a difficult issue. He even said at one stage that the reason why not too much is specific in this area is that elements of it are not much more than a guess. Perhaps they are a little more than a guess—perhaps an estimate—but there are manifold uncertainties, and the noble Lord is as aware as anyone on the Committee of these uncertainties. I am not in a position to answer his question in specific terms. The noble Lord also linked that with the question of information for the consumer. That was a debate that we had with regard to the Bill. As he said, the Government were resistant then, despite his strenuous efforts to persuade us of the virtues of that approach, and he will not be surprised that I have not come along to a debate on an order armed with a change to government policy of such significance. We do not expect the renewable energy strategy to have any large impact on bills in the immediate future. In the medium term, as the noble Lord indicated, it will cause some price increases. That has implications for fuel poverty, and the Government will have to address themselves to those issues at the time. We seek to ensure that we take the most cost-effective approach to meeting our targets. We will look after those consumers who are most exposed and most in need, and the Government have a record on combating fuel poverty of which we are proud. We are concerned to promote energy efficiency. We want households to play their part so that energy efficiency improves because it reduces consumption, which is an important way of keeping costs down. I am not going to be able to satisfy the noble Lord on the question of figures, and I do not really think that he expected me to do so, except to indicate that we recognise that there will be some increase in costs as a result of the order in the medium and longer term. I hope that he will appreciate that the targets we have set and are committed to meeting, although they involve increased costs, are part of an obligation that the Government—and, I think, wider society—regard as of the greatest significance with regard to the threats from climate change unless we have effective strategies. I agree with the noble Lord when he says that an underpinning principle behind the introduction of ROCs and the changes with regard to banding is that, over a period of time, stability is important. You cannot expect serious investment decisions of the size that is required if companies feel that there may be rapid changes which they cannot take into account in their forward planning strategies. We will follow the same process for the future as we have followed in determining these bands. We will commission modelling of costs from consultants on a UK basis. We will have the banding based on these costs from consultants. We will have peer review consultants working with the industry groups. We will make sure that we consult Ministers in the devolved Administrations. We will recognise that this process has to be the product of understanding and consensus, not one that is subject to arbitrary decisions by the Government which might relate to aspects of wider policy with regard to the economy. There has to be some consistency and stability with regard to the process. I entirely accept the noble Lord’s comment on that point. The noble Lord asked me a specific question about whether we had approval from the European Community in a formal notification. The answer is in the affirmative; we do have that, so we are able to make progress on that part. He asked whether the co-firing cap might restrict the market. We do not think that it is significant in those terms. We have included the cap on the number of co-fired ROCs that a licensed supplier may use to meet its target due to concerns expressed by a number of members of the industry in consultation responses that unrestrained co-firing could lead to dangerous unpredictability in the value of the ROCs. We will look at this again, and if we are provided with evidence that such a threat materialised or could materialise, we will look at it again and revise our position.