I thank all Members who have contributed, particularly the noble Baronesses, Lady Boycott and Lady Bennett, for Amendments 134 and 135—the noble Lord, Lord Lucas, proposed them but sadly is not in his place. I am grateful to noble
Lords who met me and officials recently to discuss this matter and give us a chance to talk through the departmental thinking.
As I said when we met, the Government recognise the role that community and local renewable energy schemes can play in supporting our net-zero targets. But we continue to believe that small-scale, low-carbon electricity generation should be brought forward through competitive, market-based solutions. A key feature of the smart export guarantee regime is to allow suppliers to set both the tariff level and the structure and for suppliers themselves to determine the value of the exported electricity alongside all the associated administrative costs. Any move to introduce a regulated price for exported electricity has the potential to limit the overall scope for innovation and export tariff packages. This would fundamentally undermine the principles of the supported export guarantee policy objective, which looks to encourage a market-driven approach.
Furthermore, the amendments as drafted are unlikely to result in better outcomes for consumers compared with other tariffs that would be available from suppliers. First, there would be initial set-up and ongoing delivery costs associated with the scheme for both Ofgem and the suppliers, which we expect would be material. These costs would be recovered via the service fee charged by suppliers and therefore probably reflected in the local tariff price.
Secondly, small-scale, low-carbon generation will, by its nature, be intermittent and unable to supply local consumers at all times. Suppliers would therefore need to buy additional wholesale energy from other sources—for example, during periods of peak demand—and incur all the associated network and system costs. The local tariff would also be required to have regard to the export price paid to the local generator. This would create a somewhat perverse outcome where higher export prices would benefit the generator but also increase the tariff price.
As a result, there is no guarantee that the local tariff would be lower than the current regulated standard variable tariff. In fact, there is some reason to believe that it would actually be higher.
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As set out previously during Committee, existing market reforms that are under way could further support the development and uptake of small-scale, localised electricity generation. The Government are developing local partnerships in England that will enable supportive communities to host new onshore wind infrastructure in return for benefits—including, for example, lower energy bills. The Government will consult on the specifics of any new partnership scheme.
At the same time, Ofgem is progressing work on electricity network charging reforms, while the Government are considering wider retail market reforms and undertaking a review of electricity market arrangements, which is considering how markets can better value small-scale distributed generation.
The noble Baroness, Lady Young, asked about timescales. We aim to publish a second REMA consultation this autumn, and we will take decisions
on shorter-term reforms more quickly where it is viable to do so through the REMA programme.
None the less, I reassure noble Lords that I understand the issues they have raised and, as we outlined in the meetings we had, my officials are actively looking into this. We will continue to engage with Power for People on these amendments and with the wider sector through the community energy contact group.
Finally, the other amendment in this group is Amendment 94, tabled by the noble Lord, Lord Ravensdale, which seeks to ensure that guidance is published for local authorities regarding local area energy planning. We are considering the role of local-level energy planning in delivering net zero. It is vital that any approach endorsed by government is considered carefully to ensure that it is deliverable, cost-effective and aligned with wider policy intent. We are continuing to work closely with stakeholders on this issue, including with Ofgem as part of its ongoing governance review into local energy institutions and its proposals on regional energy system planning, and with UK Research and Innovation and its work on decarbonisation planning.
Local authorities can carry out local area energy plans at the moment, should they choose to. The Government are supporting this through the prospering from the energy revolution programme, to which we have so far committed £104 million-worth of funding. I know that the noble Lord, Lord Ravensdale, had the opportunity to meet my officials ahead of the Recess to discuss some further details and to gain some understanding of the work my department is already doing in this space. I hope he found that reassuring and was convinced that this is an area of work on which we are already actively progressing.
With these reassurances, I hope noble Lords will feel able to withdraw or not move their amendments.