Clause 8 - Microgeneration and access to green energy certificates

Part of Climate Change and Sustainable Energy Bill – in a Public Bill Committee am 4:30 pm ar 25 Ionawr 2006.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Malcolm Wicks Malcolm Wicks Minister for energy, Department of Trade and Industry 4:30, 25 Ionawr 2006

Let us understand the governance issues. Ofgem, as a non-ministerial department, answers to Parliament, not to the DTI. It is right for hon. Members to raise concerns here, but Ofgem develops its own procedure. As has been said, the message about what Parliament wants the regulator to do will be loud and clear; it is already. It is important to understand that Ofgem is not a sub-unit of my, or any other, Department.

The original clause 8 specifically mentioned a number of green energy certificates: renewables obligation certificates, known as ROCs, levy exemption certificates—or LECs—and renewable electricity guarantee of energy certificates, known as something so ridiculous I am not going to spell it out. There is consensus that microgenerators should not be discriminated against. In the Bill, we aim to provide several measures that will make it easier for microgenerators to obtain renewables obligation certificates. We will table amendments to that effect in time for the Committee’s next sitting. However, we do not think that microgenerators encounter the same barriers when obtaining levy exemption certificates and—I will say it—REGOs, or renewable energy guarantees of origin, as they do when obtaining ROCs.

For example, a significant administrative barrier preventing microgenerators from obtaining ROCs is the need for a sell-and-buy-back agreement. That is not required for either of the other two mechanisms. That is an issue that we are addressing in the Bill. Other barriers that exist are better addressed outside the Bill, and will be considered in the forthcoming Government strategy on the promotion of microgeneration.

Ofgem’s principal objective is clear and gives it clarity of purpose for its decision-making process. The principal objective is

“to protect the interests of consumers wherever appropriate by promoting effective competition.”

We must always remember that the statute describes future consumers as well as existing ones, and that means that Ofgem should not make decisions that discriminate against microgeneration. That, however, is different from being required to promote microgeneration.

Ofgem’s secondary duties ask it to have regard both to the environment and to the achievement of sustainable development. There is also the Secretary of State’s social and environmental guidance, which allows Ofgem to contribute to broader Government policies without going against the principle of arm’s-length regulation. The Sustainable Energy Act 2003 made it a statutory requirement for Ofgem to produce regulatory impact assessments for all important decisions, and those RIAs have to include an environmental impact assessment.

It is already in Ofgem’s remit to consider microgeneration. Given its recent consultation on how the regulatory framework might need to be adapted for microgeneration, it is clear that the issue is on its radar. The Government’s work on microgeneration, and this Bill, mean that Ofgem cannot fail to take notice of the momentum behind microgeneration.

It should also be noted that none of Ofgem’s duties specify a form of generation. We ask Ofgem to protect the consumer; that is clear. To ask it to protect the consumer and at the same time to promote microgeneration might be anything but clear. However, the new clause shows Ofgem that Parliament believes that there is a place in statute for the regulator to consider microgeneration. Section 47 of the Electricity Act 1989 already gives Ofgem powers to look into certain activities in the electricity sector. By adding microgeneration to those activities, Parliament is sending a clear message to the authority that we take seriously the contribution that microgeneration can make, and that we fully expect Ofgem to do so as well.