14:30 Dr Alan Whitehead (Southampton, Test) (Lab)

For all those reasons, I suggest that the safest course of action would be to suspend the changes, carry out a consultation and produce an impact assessment. That would not lead to any danger of new plants suddenly coming in under the wire. If it is still felt necessary to make the changes after all that, and after consideration of what CHP plants can do to make the changes necessary, so be it. However, I suggest that to go ahead with the changes on such a thin raft of evidence, and on such a poorly designed basis of operation, does not make safe our goals of ensuring that the renewable heat incentive provides for the decarbonisation of heat in an efficient way and of encouraging plants to develop in that way. I suggest to the Minister in a friendly manner that securing those goals might be the best course of action not just for the industry and the renewable heat incentive, but for the future of decarbonisation in the heat sector as a whole.

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14:44 Callum McCaig (Aberdeen South) (SNP)

When the changes were originally brought forward, they were approved by colleagues of mine at Holyrood, largely due to inadequate, and in all honesty misleading— I do not believe it was deliberately misleading, but it was undoubtedly inadequate—information provided to the Scottish Government. They were told reliably by the Department of Energy and Climate Change that the regulations would have a negligible impact in Scotland, and that only two projects would fall as a result. Since the regulations came into force, several of us have come across constituents and companies—considerably more than two—that will be severely adversely affected by them. I believe that there were nine live applications in the system that was available to the Department of Energy and Climate Change, but that information was not provided to the Scottish Government when they made their decision.

The Minister is new to his position, and it would be unfair to burden him with the mistakes that were made by the previous Department and previous Ministers, but it behoves him and his Department to learn from those mistakes and ensure that they are not repeated. There is a real issue here, of which this situation is symptomatic. The goalposts of support for low-carbon electricity production have been repeatedly and randomly moved, without any clear strategic end in place. That is certainly how it seems to me. That has substantially damaged the sector’s confidence that the Government will keep their word, which has increased the cost of borrowing, and the uncertainty is damaging our ambition to meet our climate change targets and carbon reduction plans. That must not continue.

The former Select Committee on Energy and Climate Change conducted an important investigation of investor confidence and made it clear that this situation must not continue. The changes have made things more expensive and damaged our ability not just to deliver on our carbon reduction plans but to deliver the energy that we require. As well as answering our questions about the consultation, the reasons for the changes and why proper clarity was not provided to the Scottish Government, will the Minister reassure us that past mistakes will not be repeated?

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14:51 Jesse Norman (Conservative)

I will address all the issues that have been raised today and talk a little further about the regulations, as the Committee properly demands. Where there is a demand for both heat and electricity, combined heat and power offers the most energy-efficient use of fuel, with the potential to deliver savings of up to 30%. The renewable heat incentive offers support for the deployment of CHP plant, including that using solid biomass fuel, recognising the role that that technology can play in decarbonising heating and power production. The Government introduced a dedicated biomass combined heat and power tariff into the non-domestic RHI scheme in May 2014. That tariff is approximately double the tariff for large biomass heat-only plants. The biomass combined heat and power tariff is 4.22p per kilowatt-hour, compared with the large biomass heat-only tariff of 2.05p per kilowatt-hour.

I agree very much that the Government have a responsibility to ensure that subsidy is in the taxpayers’ interest, and they are right to insist on a certain level of efficiency. I welcome the change that the Minister has just announced, but the Energy and Climate Change Committee’s report on investor confidence, already mentioned once, emphasised that it is important that we move away from any sort of retrospective changes. Now that energy policy is within business policy, can the Minister reassure us that this is a new beginning for energy policy?

The second point to my right hon. Friend is that although in some cases industrial strategy has been done badly, in others it has been done rather effectively. Parts of Scandinavia have seen effective industrial policy, although I am not suggesting for a second that the industrial strategy that this country develops will necessarily model that. I am sure it will take the best of all thinking on this topic. It is perfectly proper for Government to seek to decarbonise industry, given that industry has an intrinsic market-driven tendency to burden the environment with costs that it need not meet itself through what economists call “externalities”.

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