Electricity Generation: Local Suppliers

Motion made, and Question proposed, That this House do now adjourn.—(Maria Caulfield.)

I am grateful for the opportunity to open this Adjournment debate on an issue that I know is of great importance not only to communities in Ceredigion, but, as is evidenced by the attendance of hon. Members in the Chamber this evening, to communities across these islands.

We face many pressing challenges as a society: the health and economic consequences of the covid-19 pandemic have been debated today, but just as pressing are the devastating impacts of climate change. If we are to meet these challenges and, ultimately, emerge stronger, more secure and more prosperous, it is vital that we transition rapidly to a society powered by energy generated from renewable sources. The Committee on Climate Change has been clear that the UK is off track to achieve our commitment to net-zero greenhouse gas emissions and meet our obligations under the Paris climate agreement. At present, renewable electricity generation accounts for only 11% of all UK energy use, and our transport and heating networks need to be electrified to decarbonise our economy. If we were successful in doing this, new policies and regulations would be needed to ensure that the resulting rise in electricity demand was met by renewable generation.

There is good news: villages, towns and cities across the land possess incredible potential for community renewable energy projects, such as solar arrays in fields, wind turbines, and hydro units in rivers. Such schemes support local skilled jobs and offer local economic opportunities.

Does my hon. Friend agree that to fully realise our local energy-generating potential we must invest in grid-integrated, locally situated batteries? They will smooth out the problems that hamper the grid supply in so many of our rural communities.

I am grateful to my right hon. Friend for making that point. She anticipates a few of the arguments I wish to make this evening, but she is right to emphasise the role that batteries and improving storage will play in the future. If we are to balance local generation and local demand, being able to store a lot of this renewable energy will be key. These local, community-owned renewable energy projects support local skilled jobs and offer local economic opportunities, which will be very welcome in the face of the covid-19 pandemic’s impact on so many of our communities.

Bath and North East Somerset Council is working closely with Bath and West Community Energy, and such partnerships are incredibly important for getting local buy-in. Does the hon. Gentleman agree that in order to get that local buy-in, this really has to work financially as well for the people?

I am grateful to the hon. Lady for making that point. She rightly says that this has to be viable for these community schemes and partnerships if they are to fully realise the potential that so many possess. I have put on record details of one local energy partnership in Cardigan in my constituency that I know is trying to grapple with some of these challenges.

I congratulate the hon. Gentleman on securing this debate. I agree with his comments about community groups and the opportunity here. Does he agree that the monopolies of service provision by greater companies must be brought to an end, as we see many local people who are attempting to expand business being precluded from doing so by legislation that seems to be put in place only to frustrate, rather than to allow for competitive provision?

The hon. Gentleman has got to the nub of the issue and has anticipated the main thrust of my argument. At present, the regulations and the way in which legislation has been structured may be outdated and disadvantage some of the smaller generation schemes. His point will be key if we are truly to capitalise on the potential that the smaller projects possess.

What are the hon. Gentleman’s thoughts on partnering with local authorities, at whatever tier? He mentions community projects at village level, but what about town councils? I am thinking specifically of Newport Pagnell Town Council, which is very keen to get involved in such initiatives.

The hon. Gentleman makes a very valid point. We must not think that community-owned projects are necessarily just at parish council level; towns and municipalities can also play a part. If we make any changes, we will do well to ensure that we better empower such projects, because I believe that they will be key to our moving to a decarbonised economy.

I concur with the point made by the hon. Member for Milton Keynes North (Ben Everitt); Warwick District Council is similarly interested. Does the hon. Member for Ceredigion (Ben Lake) agree that we have to ensure that local authorities can develop projects through the planning system, work with grid operators and start generating at scale in the immediate area?

The hon. Gentleman makes a very good point. As is often the case, if we are to transition as rapidly as is necessary, we will need to bring together so many aspects of regulation and different Departments.

A lot of the points made by hon. Members touch on the fact that since the 1990s we have seen a transition in how energy and electricity have been generated and transmitted across the country. It will need to change even further, of course; we are moving from an electricity system that consists of a small number of quite large power plants, serving a passive operation, to one with potentially thousands, if not millions, of smaller generators with storage and active demand, complementing huge numbers of large-scale renewables.

Does the hon. Gentleman agree that Cornwall has a vital role to play in battery storage technology, with our recent discovery of lithium in our Cornish tin mines? We will be able to use that Cornish lithium to build the battery technology that he describes.

I am grateful for that point, because one of the heartening news developments of recent weeks has been about the lithium in Cornwall. It is clear that those deposits will be crucial if we are to make this transition.

The question that arises from the shift that I described is whether a system with potentially millions of moving parts could be managed in a centralised way even if we wanted it to be. I believe that local generation to meet local demand offers a possible answer.

I congratulate the hon. Gentleman on securing this debate, which is of the utmost importance. Does he agree that fantastic community projects such as Sheffield Renewables should be better supported by the Government to provide local renewable energy, and that that support should be enhanced as we try to tackle the climate emergency?

The hon. Lady’s point is an important one: we need to make sure that community schemes are supported. It also anticipates where I want to take my speech next, so I am doubly grateful.

The potential capacity of local community-owned energy is quite astounding. A 2014 UK Government report stated that community energy projects could contribute as much as 3,000 MW of electricity generation capacity by 2020. Unfortunately, we have not quite met that target, but the potential is striking nevertheless.

That potential is frustrated by the antiquated rules that govern our energy markets, which were designed primarily in the 1990s and were suited to a different system of large power stations and a handful of utility companies. Unfortunately, those rules still rule the roost, and they create insurmountable cost barriers to any community energy initiative that wishes to sell the electricity it generates directly to local households and businesses.

A report by the Institute for Public Policy Research shows that the technical and operational challenges involved in becoming licensed to supply energy to customers lead to initial costs exceeding £1 million. There have been attempts to address that. A few years ago, Ofgem launched Licence Lite, which was aimed at creating a less onerous set of supply licence conditions for specific types of new, innovative supply business models. Unfortunately, that has proved complex and has not been well used to date. To its credit, Ofgem has also launched an expanded Sandbox service to allow innovative companies to apply for derogations from the traditional licensing regime and stipulations, and it has extended its ability to grant those derogations to certain local generators.

However, the most effective solution would be to introduce greater proportionality to the licensing system, to ensure that the costs and complexities of being a licensed electricity generator are proportionate to the scale of its supply. If the costs are proportionate, it becomes financially viable for smaller-scale renewable generators to supply electricity, and, in turn, new community-owned schemes will become viable.

The hon. Member may be aware that I co-chair the all-party parliamentary group for “left behind” neighbourhoods, and there are many opportunities for this in those communities. In my constituency, for example, there is heat from mine workings. Does he agree that these sorts of innovation can come through this channel much better than others?

I am grateful for the hon. Member’s intervention. He makes a key point: the transition to a decarbonised economy also has a lot of benefits in terms of economic development in areas such as his and mine, which have been left behind. This offers so many opportunities, and we would do well to make more of them.