A vote in the House of Lords on 21 October 2015 has, for the moment at least, derailed the Government’s proposals to prevent new onshore wind farms commissioned after 31 March 2016 from being subsidised under the Renewables Obligation (RO).

Readers of our earlier posts on this subject (see here and here) will recall that in June 2015 Government said that its proposals would form part of the current Energy Bill.  In July, “grace period” arrangements were promised for those projects with planning permission, grid connection agreements and land rights by 18 June 2015.  On 8 October, Government amendments to the Bill, setting out the details of grace period relief, were  published.  They covered a somewhat broader range of cases than just the “planning / grid / land rights” one.  After a Committee debate on 14 October 2015 in which Lord Wallace of Tankerness and others identified a range of scenarios where they felt projects would, unfairly, not benefit from the grace period amendments, Lord Bourne, for the Government, withdrew the amendments to consider them further.

Before the debate at Report stage on 21 October, Government re-tabled its amendments, virtually unchanged, and Opposition Peers tabled a number of others, including one that simply removed clause 66 (the early closure provision) from the Bill altogether.  This amendment was passed, by 242 votes to 190.

What is going on, and what (so far as we can tell) happens next?

  • Ministers have suggested that in voting to remove clause 66, Peers were flouting the “Salisbury convention” – i.e. the principle that the unelected House should not thwart measures that have appeared in the election manifesto of an incoming Government.  The Opposition response to this is that the Conservatives’ General Election pledge to “end any new public subsidy” for onshore wind was one thing (which might, for example, equate to removal of onshore wind from the list of technologies eligible to compete for Contracts for Difference (CfDs)); but bringing forward the closure of the RO (an existing subsidy) is another thing altogether.
  • The Opposition stress that they are not opposing the phasing out of onshore wind subsidies per se – rather, they object to what they see as the Government’s failure to provide details of the proposed grace period arrangements soon enough for them to be properly scrutinised and amended, and to the fact they do not cover various categories of projects whose exclusion from the RO seems to them to be unfair.  It is also alleged that the average savings to Bill payers (30p per household annually) from early closure are outweighed by the lost investments on the part of the industry (over £300 million).
  • Some of the “hard luck cases” cited might not have achieved RO accreditation even under the existing, pre-18 June position on RO closure.  Others that it is said may be unfairly treated by the 8 October amendments include projects where a local authority decided to grant planning permission before 18 June but the mitigation arrangements under a “section 106” (England and Wales) or “section 75” (Scotland) agreement were not yet signed off; cases where the developer gave the local planning authority longer than the statutory minimum before treating its silence as a “deemed refusal” of planning permission and challenging it; and cases where a project essentially had a grid connection agreement for some time prior to 18 June but temporarily lost it before that date.
  • Lord Bourne may win a prize for Parliamentary understatement when he said, towards the end of proceedings: “The debate has exhibited a clear difference of position in relation to onshore wind.”
  • For the moment, the Bill does not provide for early closure of the RO to new onshore wind projects.
  • In order to carry out its policy, the Government will have to muster more support at Third Reading in the Lords, or reintroduce the early closure provision in the Commons, where its MPs are likely to be easier to whip.  In the latter case, the provision would then have to return to the Lords for consideration, and could go through more than one round of “ping pong” between the two Houses – with the wind industry (or at least many projects) in suspense in the meantime.
  • Unless the Prime Minister really intends to create enough new Peers to guarantee passage through the Lords of the RO closure provisions in the form the Government wants (as appeared to be suggested in connection with the parallel Lords rebellion on cutting tax credits for working families), it looks as if Government needs to secure agreement on a package of grace period amendments that Opposition Peers are content to accept.
  • The Parliament Act 1911 enables the Government effectively to bypass the House of Lords in certain circumstances.  But it is unlikely to be of any use to the Government on this occasion, since its timescales would not allow the Bill to be enacted until well after 31 March 2016 – and possibly not (or only a few weeks) before the general RO closure date of 31 March 2017.

Finally, it is worth noting that the vote on clause 66 was one of two Government defeats during the Report stage debate on the Bill.  Peers also voted in an Opposition amendment that would change the basis on which the UK’s carbon budgets are set under the Climate Change Act 2008 – probably with the effect of making them harder to meet.  This more technical and, on the face of it, less politically exciting change is in part a reaction to the Government’s confirmation that it will not be setting a decarbonisation target for the power sector (whose emissions are said not to be counted in carbon budget setting because they fall within the EU Emissions Trading Scheme).  In the longer term, it may – if it survives – have even more far-reaching effects than those of the removal of clause 66.