My Lords, that was an interesting debate. It has slightly changed the context for the next two amendments, if that does indeed transpire. We look forward to getting clarity on this. It hinges on the word “new”. In fact, so much of the Bill hinges on the word “new”, because it was a manifesto commitment to have no new subsidies for onshore
wind, which could have been interpreted in lots of different ways. I think there was a manifesto commitment that there will be no new targets. We need to start to understand how the Government use that word.
As I have mentioned, Amendment 35B seeks to make up for one of the biggest holes in the impact assessment, which is to consider the implications of this new change of policy. Indeed, when we come on to talk about the last amendment, our concern about the transition to the contracts for difference regime is that this will have an impact on the taxpayer that is not yet being monetised, described or communicated by the Government.
Amendment 35B would simply require:
“Within six months of the passing of this Act, the Secretary of State shall report to Parliament on the estimated cost … should the United Kingdom not comply with the 2020 EU renewable target”.
Of course, the wording is not written in a way that it should be in a final version. However, it is an appropriate moment to raise the point that it is not the case that we can simply change our policies without due concern and reference to the implications if we were then to miss our EU requirements. As I have said in previous debates, there would be two implications. First, we would be forced to purchase renewables certificates from other countries. Let us just think about that for a second. That would mean us sending our money to other countries to purchase their investments, which would make them have more jobs and supply chains, and help them to decarbonise. We would be spending our hard-earned cash on their development of a very successful renewables industry. That does not seem like sensible policy to me, but that is what would happen if we decided simply to buy our way out of this target in the mistaken idea that this would somehow be better value for money for the Government. I would like to hear from the Minister whether there is any truth in the speculation we have seen in the media that that is one of the Government’s ideas—that they would be prepared to buy their way to compliance in terms of the targets, and what that would cost us. Secondly, we may be fined if we are in non-compliance. I would like clarity from the Minister on what the penalty regime looks like if we fail to meet our EU renewables target.
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I am sure that the Minister will lead off with his often-stated, confident assertion that we are on track to meet our target. Let us just look at the numbers, shall we? We have a 20% renewables target overall across all energy, which translates into a 30% target for renewable electricity and, I believe, there is a 12% renewable heat target, and therefore a 10% renewables target. There is no breakdown of those targets at a European level into those sub-sectors: it is simply an all-energy target, and there is no further subdivision into technology types. That is purely a rod of the department’s own making. The department and the Government have chosen to subdivide and subdivide until we all have little pockets of so-called allocations of CFDs and subsidies that they are seeking to manage into a perfect solution in 2020 when we hit our targets.
It all looks rather statist, I have to say, but that is the current system. You can see it writ large throughout the impact assessment. The thing that has most attention devoted to it is these subdivisions of subdivisions into how much onshore wind we think we might need. From my experience of working inside and outside the Civil Service, that makes me nervous. If there is one thing I have learned, it is that it is incredibly hard to predict the right way forward in terms of technologies. It worries me when I see documents emerging from the Civil Service seeking to predict and provide a very detailed plan—I hesitate to say “Gosplan”—of how our electricity system will look in 2020. It will almost certainly be wrong.
How are we doing in relation to the divisions of the targets that we have? As has been mentioned, we were at just under 20% of electricity from renewables in 2014, so you could argue that we are on track to hit our 30% by 2020, although there should be no complacency as there is still quite a hill to climb to deliver another 10% in only five years. As has been pointed out, there is something of a time lag in all these technologies. If you take your foot off the gas now, get it wrong or destabilise the sector, you may find that you will have to make up a lot of ground in a very short time towards the end of this decade.
Unfortunately, we are not doing quite so well as regards heat, and in 2013 we hit only 2.8% of the target. As I say, we are trying to hit a target of 12% for heat, so a quadrupling over the next five years looks like quite a challenge. From everything that I have heard about how the renewable heat incentive is going, things are picking up, but we have significant underspend of the budget that has been made available for the RHI. I find it very difficult to get any clarity on what exactly the Government’s policy on renewable heat is going forward. I would welcome some clarity from the Minister on that.
As regards transport, we are at 4.4% of our target of 10%. Here it gets even harder for the Government to make up ground because we have a frozen renewable transport fuel obligation which stipulates that 5% of our transport fuel should come from renewable sources. There has been no sign of whether that 5% cap will be alleviated. If policy on that is not changed, and we do not see a return to the escalator in that policy, we will be at merely 4.4% or lower, depending on whether anyone stays in a business that is essentially contracting in size.
What are the implications of missing our targets? The very helpful and excellent report by PWC, Investment in Renewable Electricity, Heat and Transport, contains some very interesting charts. If we read across and assume that we stay at 3% for heat and 4% for surface transport—I hope that we will not stay at 3% or 4% respectively, but that is where we are at the moment—the implication is that, to meet our target overall, we will need to see in the region of 50% to 52% of electricity being renewable to comply overall, or we will purchase a significant volume of certificates from other countries, or we will face a fine. Let us be generous and say that we can double our heat figure to 6% and perhaps inch up to 5% or 6% for transport. However, we would still require 45% of electricity to come from renewables. Therefore, we cannot say that the Government are
comfortably on track to meet their targets—far from it. Now is not the time for complacency, to destabilise the industry or to introduce capricious changes in policy without consultation. The Minister can say that this point was in the Conservative manifesto, but a manifesto is a manifesto—nothing more. These Houses are here to keep a Government in check and to scrutinise proposals. These proposals lack detail, have not been thought through and are not fit to leave this House in the way that they arrived or to receive Royal Assent in anything like the shape in which we see them now.
We believe that we need more information on the amendment we are discussing. I have sympathy with the noble and learned Lord, Lord Wallace, who I think suggested that we should ask for a redrafted impact assessment. I will certainly go away and talk to others about whether that could be progressed, and what the process for that might be. However, in the absence of information, this amendment is tabled to ask the Government at least to start to consider the implications of the reality of the situation—namely, we are not on track to meet our EU targets, and that will come at a price.