15:15 Claire Perry

We heard in the evidence session this morning about suppliers of renewable tariffs ensuring that what they source is genuinely from renewables. They might undertake power purchase agreements from independent producers so that they can guarantee that their tariffs are sourced directly from those producers or, under certain circumstances, they might have their own supply of renewable energy because they have themselves invested in wind farms or other forms of such energy and therefore know that their renewable energy is wholly such. Under those circumstances, those companies—there are a number of them—inevitably incur rather more complicated arrangements in the delivery of their tariffs and in guaranteeing that these really are what they say they are, wholly renewable tariffs delivered to customers on that basis.

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15:30 Bambos Charalambous (Labour)

When I asked Octopus and Bulb this morning whether there was a need to tighten the definition of renewable energy, they both agreed that there was. They saw it as a way of the big six getting round the cap. So does my hon. Friend agree that there needs to be a tightening of the definition?

That concern was absolutely right. Regrettably, it is the case that throughout the present tariff offer a number of tariffs are in place that purport to be green tariffs, but when we drill down to what they consist of, they are pretty much not green tariffs. They may have a part of renewable energy in their make-up. It may be claimed that the company is advantageously purchasing renewable energy as part of its overall purchase arrangements, but of course we know in terms of today’s energy mix that it is fairly difficult to rigidly remove oneself from purchasing any renewable energy in the portfolio of purchases for tariff purposes.

This is an important area of the Bill. Does my hon. Friend agree that there is a requirement on energy companies to source renewable energy—quite rightly—and those costs are already spread across all bill payers? Why should there be a premium on top?

The point that my right hon. Friend makes is, I think, taken into account by the circumstances that now apply across the board for energy sourcing. As she and I know, having talked about this for years, the process of the renewables obligation did impose a particular obligation for a proportion of energy purchased to be green. Then there was a system of trading those obligation certificates. Those people not directly purchasing green energy would have to purchase certificates, which could be traded from those who had actually traded in green energy in the first place, so that those involved had, in one way or another, carried out their obligation. The overall design of the renewables obligation system was to encourage the production of green energy, because the beneficiaries of the certificates when they were traded in cash would be the producers. That was a system that very much incorporated in it an incentive to trade in green energy in the first place.

Now, of course, the renewables obligation is no more. It continues as a ghost trade system and will continue on a declining basis, I think, until 2027, but as of March 2017 no more renewables obligation certificates are being issued. They are being replaced by the contracts for difference system, which does not impose an obligation to purchase green energy in the same way as the renewables obligation system did. The prospective system does not, as my right hon. Friend suggested, provide a universal underwriting of green energy production. She is right, of course, that the system overall encourages renewable energy production, but not in the same way as the renewables obligation.

I do not think that that particularly detracts from my right hon. Friend’s fundamental point, but it puts us in a position where we can properly consider the idea that a number of energy companies might accidentally, as it were, purchase green energy that does not, otherwise, have an obligation attached to it, and introduce it as part of a green tariff that is not really a green tariff. I suggest that companies wholly in the business of producing renewable energy, or those that produce it from their own sources or sources guaranteed through a power purchase agreement, or something similar, with the operator, are in a different category. I want to emphasise that difference with respect to the purpose of the amendment.

That is a reasonable and honestly held opinion about the extent to which it is possible easily to distinguish when greenwash is not greenwash and the point at which an energy company, even with a partially green tariff, puts in something that is honestly green and not something that they have just cooked up because they happen to have purchased something that has an element of traceable green energy in it.

I have tried to think this through and consider how we might be able to make honest citizens of those companies under such circumstances. It is possible to argue that even if a company accidentally buys green energy, if it is genuine green energy, then yes, it has sourced green energy. However, the bar needs to be set rather higher.

The hon. Gentleman’s amendment uses the word “wholly”. In my view, “wholly” means that 100% of the energy would be renewable. To me, that is wholly unworkable. I want more consumers to get more choice. If they really wish to buy more renewable energy packages, they can do that. I would also like to see green tariffs that encourage smart consumption—smart appliances that switch on and off at peak times, for example. Those could also be bundled into a green tariff.

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16:00 Caroline Flint

My hon. Friend has clearly outlined the concerns that we have—and share with others across the House and those outside who have made representations—about the danger of people trying to use green as a way to avoid providing fair prices. Let us be clear: we are talking about the sticky customer base—those people who, year in year out, find that their energy bills go up. The CMA review and others have found how people have been overcharged for a number of years now, and there has been much discussion in this place about that. I totally understand my hon. Friend’s intent in trying to introduce “wholly” as another way to separate those who might game the system from those who are in all good faith seeking to invest in and buy 100% renewable energy.

As someone who very much supports renewable energy, not only for our electricity and power supply but for our heat supply as well, I am not sure of the evidence. I may be convinced during the passage of this Bill that a premium price for green energy stacks up. I might be wrong, but I am not sure it does stack up. I apologise to colleagues on the Committee that I was not able to be here this morning, but I have read the written submissions—in particular, those from Bulb and OVO, who outline their concerns about exempting green tariffs from the legislation. A lot has been done to contribute to today’s situation, where the sort of energy that we want, for climate change and in terms of being innovative in the sector, has seen a huge reduction in overall costs and is therefore able to compete very effectively in the market.

In my mind, the right hon. Lady is not a footnote—she is a major chapter heading. I am enjoying listening to her speech, because it was largely as a result of the great cross-party consensus that we brought in the Act—and some pretty tough decisions, which she supported in her shadow Secretary of State role. That is why we are able to buy renewable energy at prices that do not require a substantial subsidy. That is why we all look forward to a situation where customers should not be charged a premium for that renewable energy source.

A lot has been done to drive investment in the renewable sector, and some of that is ongoing. My hon. Friend is quite right that the renewable obligation is coming to, if not its end, then close to it. We also have contracts for difference. We also have the renewable heat incentive for heat. A business in my constituency that produces green gas is a beneficiary of that. In lots of different ways, there continues to be support for renewable energy of one form or another. No doubt, should it get the green light, the tidal lagoon will also be receiving a contract for difference that will guarantee a price for what it produces over a number of years.

I hope we can think more about those issues. We may not resolve them today, but we should give them some more thought—I certainly will. I might be wrong about this, and I am happy to receive submissions and thoughts from others outside this place. For reasons of simplicity, and for the development of the renewable energy market and how it has been helped to get to a place where it provides cheaper energy today than our fossil fuels, it is still worth considering whether any kind of exemption is warranted in the Bill.

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16:15 James Heappey

It is useful that the Minister will go away and make an analysis of the green products that are already on the market. I wonder whether she might also, with the evidence from Octopus and Bulb ringing in her ears, go away and ask the Department to go for just one more lap on whether or not this exemption is necessary all together, or whether it might do more harm than good when it comes to promoting green energy and the way that consumers regard green tariffs.

There is an interesting question. There is the transparency issue, there is the consultation issue, but the third thing is this: is it zero, 100 or somewhere in between? It will be explicit, I think, in conducting that analysis that Ofgem has chosen a level of what it thinks this level will be. I totally understand the point that the hon. Member for Southampton, Test made about us all wanting a world in which renewable energy is not intermittent. Indeed, I opened Clayhill solar farm, the country’s first subsidy-free solar farm, partly because it has managed to achieve on-site storage, providing both a better economic return and overcoming the problem of intermittency. That is all absolutely correct.

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