Feed-in Tariffs (Amendment) (No. 3) Order 2015

Tom Pursglove Excerpts

Monday 13th June 2016 General Committees

[Tom Pursglove (Corby) (Con)]

I draw the attention of the Committee to my declaration of interest as director of Together Against Wind. When reaching these policy decisions, do Ministers take into account the real challenges that our manufacturing industries are experiencing? Spiralling energy costs have made it difficult in recent years for them to compete on a global playing field. It is important that we control costs and we must not see them increase in what are already difficult circumstances.

[Andrea Leadsom]

My hon. Friend is exactly right to point that out. The balance we are seeking to achieve is to be fair to the industry and fair to those consumers, including businesses—we have seen this a lot of recent weeks and months—who are really struggling to meet their electricity costs and to be competitive. As I said, overall the changes will save at least £7.6 billion from energy bills over the next 20 years.

Members of the Committee will recognise that this Government were elected with a clear manifesto commitment to keep bills as low as possible, so controlling costs under the LCF is a key part of delivering that commitment. Urgent action was needed to bring projected FIT scheme spend down in order to manage LCF spend responsibly and to protect consumers. It is simply not acceptable to continue with an unconstrained scheme.

This amending instrument makes a number of changes to the FIT scheme, including, first, the introduction of deployment caps, limiting the aggregate total installed capacity of installations that can be applied for within any quarter. That will enable us to limit spend on the scheme to £100 million up to the end of 2018-19. Such caps are necessary if the scheme is to continue and if its impacts on consumer bills are to be properly controlled. I tell the hon. Member for Southampton, Test that currently, if the technology does not reach its quarterly cap, the underspend is rolled over to the next quarterly cap.

Secondly, the order reintroduces pre-accreditation. That would not have been appropriate without the security provided by the deployment caps. It will therefore also mitigate some of the uncertainty inherent in a system of capped deployment.

Thirdly, the order removes the right to receive a generation tariff for extensions to existing installations. That is intended to incentivise generators to install the maximum capacity achievable and to eliminate the potential for gaming of tariffs.

Fourthly, the order introduces a cap on the amount of green overseas electricity by which suppliers are exempted from paying FIT policy costs.

The rest of the measures from the review are implemented through amendments to licence conditions. First, there are changes to the generation tariffs. Tariffs have been revised following consultation to ensure a viable scheme while maximising value for money for bill payers. Secondly, there are modifications to both default and contingent degression tied to the quarterly system of budgetary caps. Thirdly, there are changes to energy efficiency criteria to require that an energy performance certificate—an EPC—is obtained prior to the commissioning date of solar PV installations under 50 kW. That change has been made to encourage improvements to the energy efficiency of properties more generally.

Prior to making the changes, my Department carried out an extensive stakeholder consultation. DECC officials met stakeholders across England, Scotland and Wales, and received and analysed just under 55,000 consultation responses. We listened carefully to the views of industry, in particular the £1 plan of the Solar Trade Association, and we took account of its responses in redesigning our scheme. I myself held a roundtable for all industry associations to hear their views. As a result of our stake- holder engagement, we revised tariffs upwards to reflect the findings of the evidence provided. We allocated more budget to solar under our £100 million cap and we implemented a cap system that will allow us to recycle underspend and to consider the balance of caps between years.

Our changes combine the visibility that industry asked for with the robust cost control that the Government need.