Lord Teverson
To ask Her Majesty’s Government how they intend to implement their strategy for energy efficiency.
Lord Teverson
My Lords, I thank the group of noble Lords who are joining in on this debate. I thank them for their dedication towards the important subject of energy efficiency. It is quite appropriate today, perhaps, that E.ON, the last of the big six, has just announced its energy price rises for dual-fuel customers of some 8.7%. This means that we have had energy price increases over the last few weeks of between 6% and 11%, which is not insubstantial when we have household average earnings going up by 1% or 2%.
As a nation and as households, we tend to tackle problems and think about them more when the bill arrives on the doormat, whether it is the electricity bill or the gas bill. The nation’s example would be the impending £100 billion to £200 billion invoice that will arrive for new energy infrastructure over the next decade—depending on whether you include generation alone, or all the other areas of networks and the national grid and all of that side as well. At that point, you think you must make changes in the way that you live and you have to save on that expenditure. That is why energy efficiency and the efficient use of energy are core areas on which, as a nation, we must make sure that we concentrate.
Indeed, we have had a number of recent successes or moves forward by the Government. We have had the publication of the electricity market reform Bill, which may provide us with opportunities for demand reductions in future. We will see how that progresses through Parliament. The Energy Efficiency Deployment Office was set up in the last year, which I welcome very much. We have had the consultation on demand reduction at the end of November. We have also had a government energy efficiency strategy, which is what caused me to call for this debate. The sad thing was that, rather predictably, that strategy was not really noticed or commented on by the press or the wider community. I suppose that, in comparison with gas fracking, wind turbines supposedly blotting the landscape, the stops and starts of new nuclear or maybe even the occasional arguments between the Treasury and DECC, an energy efficiency strategy is not seen as particularly interesting news. I very much differ over that, and I will explain exactly why.
The most important thing is that there are a number of benefits from such a strategy and from energy efficiency. First, and perhaps most importantly from a human point of view, is that of fuel poverty. Clearly, if we have an energy-efficient household stock and economy, fuel poverty will go down. At the moment there are 3.5 million households in fuel poverty. Cold winter deaths are thought to be somewhere in excess of 25,000, costing the NHS £1.3 billion—but, far more importantly, there is the human cost of those deaths to those individuals and to their families.
Energy efficiency means that emissions come down and there is greater energy security. It also means, according to the Secretary of State, that we will need 22 fewer power stations in our investment programme by 2030. It could also mean that we do not have the cost of winter fuel payments that at the moment cost the Exchequer £130 million each year in subsidising people’s fuel bills, when what we really want is for them not to have to pay those prices anyway. Of course, the other big benefit of energy efficiency is that we actually reduce the energy bills not just of households but of British industry as well, making it more competitive.
Therefore, we currently have a number of initiatives, most of which I welcome. The Green Deal operates from 28 January 2013, and with that we have the open home networks. Regrettably, we have had a gap between the Green Deal starting and CERT ending, and some strain put on the industry and the house refurbishment sector over that time. We have the energy company obligation coming in. Today we announced simplification of the carbon reduction commitment, which I very much welcome. I hope that soon it will recognise renewable energy usage as well. We have the smart meters roll-out programme starting in 2014 and the enhanced capital allowance for business.
Despite having that collection of measures, what we have is seen by industry in particular and households to a degree, as a lack of clarity about the future landscape. Business has certainly not been aware of all those incentives. Although we have a carbon plan, I believe that for the first time we have a proper and important strategy for the future in this area.
I have always been pretty critical of the United Kingdom’s energy performance as regards the houses and factory units that we built in the 1960s and 1970s. However, going through the figures, I have to admit that over the past 20 years or so, under Governments of different colours, we have not done too badly. In fact, total UK energy usage has been flat since 1970. Since 1980, energy intensity—that is, the amount of energy we use per unit of GDP—has gone down 52%. That fall has been quicker over that period than that of the United States, Germany, Japan or France. We are one of the lowest of the major developed nations in terms of energy intensity. Of course, one of the reasons for that is that we have given up producing most things and we have a service-based industry. The financial services industry does not create much at all, according to some people, but it certainly does not create a lot of carbon emissions or have high energy usage.
However, since 1980, although energy usage as a whole has stayed the same, electricity usage has gone up by 60%. Even with present policies, another 10% rise is expected by 2030 and that could go up to 15% when we move to electric vehicles and a switch in space heating from oil and gas to electricity. However, the prize is great: some 150 terawatt hours of savings could be captured by 2030 according to at least relatively independent reports. Given that in 2010 total usage was 328 terawatt hours, that is a saving of 45% of current consumption. However, the risk that has been identified is that 92 terawatt hours of that will not be achieved, which is a quarter of the expected 2030 electricity consumption. That is why the concentration on energy efficiency for electricity in particular is so important. In December 2001, the Government’s carbon plan said that if we are to cut our greenhouse gas emissions by 80% by 2050:
“Energy efficiency will have to increase dramatically across all sectors”.
However, it is not just a matter of electricity usage. I have a particular concern about the zero carbon homes programme to be implemented for new homes from 2016 and for new industrial premises from 2019. Those two are a core area. The energy efficiency strategy identifies four barriers, including an underdeveloped market for energy efficiency. That market has grown but is still underdeveloped, particularly in comparison with the United States. There is also a lack of trusted and appropriate information. I hope that having smart meters in households will start to put that right. Further barriers are misaligned financial incentives, although the Green Deal is trying to do something about that, and undervaluing energy efficiency generally.
I have several questions for my noble friend the Minister. How will the Government start to overcome those barriers? That is not fully outlined in the strategy but perhaps that is still to come and the work is still to be done over this current year. Smart meters are the way to engage the public much more broadly. I would be interested to hear from the Minister where the Government are in terms of getting public engagement. Will there be a system like the TV digital switchover that was so successful? How will we get the demand side incorporated in the Energy Bill that is starting to go through Parliament? How will we integrate the European energy efficiency directive that is to come into force in 2014 into our own strategy? Can the Minister assure me that there will be no more watering down of the zero carbon buildings?
One billion pounds are being put forward for carbon capture and storage and £100 billion of investment in power generation is expected. Given that we have a housing stock of 26 million homes, that £100 billion of investment could be used in spending £4,000 on each home to cut demand in the first place. There is a great prize to be won. It is not just a case of win-win; in this case it is win again and again and again. I commend the Government’s recent work on their energy strategy and ask them to deliver it.
Lord Judd
My Lords, it is good to follow the noble Lord, Lord Teverson. Nobody takes these issues more seriously than he does and his knowledge is daunting. What he is raising and all the associated issues are absolutely central to future survival, sustainability and prosperity of our nation. The deliberations that are going on in government and elsewhere are of crucial significance. We all ought to be focusing on them, not just the usual few who concentrate on these matters.
At the outset I should mention Doha because it is intimately related to what we are talking about. Doha has been a significant step. I think that there are a lot of sceptics who feel that what was agreed has yet to be implemented. We want to see the evidence of implementation because it is in the implementation of what was agreed that the real tests will be, not in the good intentions. In retrospect it could turn into a cynical exercise. It must be made effective. I hope that the Minister will take a moment to reassure us on that issue.
One of the things that has become very clear is that in a country which has become used to cheap and easily available energy, those days are over for ever, and we have to adjust our behaviour as a nation to meet that. Of course, issues of equity and justice apply internationally at Doha but also in our own society. The methods of production, whether that involves plant or distribution, can have a disproportionate impact on less articulate, less well placed communities which have everything dumped in their immediate vicinity because the forces of NIMBYism take control. There is a real need to concentrate all the time on equity and justice in our own society—not to mention the aesthetic and environmental issues. Do we want to have a country worth living in or do we want one littered with energy infrastructure and distribution systems in which we can no longer get spiritual regeneration? These are all crucial issues.
I suggest that those issues are all related to the need in our nation for an immense culture change on the demand side. We really have to nurture a sense of national responsibility. Let me take, for example, fashion. I hope this will not be regarded as a joke because I think it is a very serious matter. We are entering the coldest part of winter. Fashion is all about smartness and elegance and how you look. Surely in a society that was taking its energy needs seriously, it would be about keeping warm. Why do we not give higher priority in our clothing and other designs to the need to keep warm and use less energy? What about our Parliamentary estate and Whitehall? Yes, there have been moves in this direction and they are to be welcomed, but it is still tinkering: we all know that. Noble Lords should walk around this building at night. How many lights are left on by us all? How much equipment is left on which need not be? Let us look at Whitehall and government institutions. How much waste is there still at that level? Where is the example to the nation? Surely, in our schools and universities, we need to have far more emphasis on talking about energy and economics with youngsters, students and post-graduates. There should be far greater emphasis on conservation. In engineering, why is there not greater priority given to the need to work on conservation, as distinct from just production methods and efficiency? We must put conservation and a changed living style much more centrally into our deliberations on these issues.
I find an inherent contradiction between a preoccupation with getting efficiency, trying to control prices and taking our responsibilities—some of which I just mentioned—seriously and having so much of the energy system dominated by private enterprise, which is about profit. There is a contradiction there. I am not ashamed to say that I have never been—I hope—a dogmatic person in my political beliefs, but I believe in pragmatism in the age in which we live. I cannot help but be convinced that the sphere of energy is an excellent example of an aspect of national life which should be better looked after by the nation as a nation within a co-ordinated and comprehensive approach to the necessary planning. We need to get the right people to do the right things within it rather than, as at the moment, trying to regulate the market as it develops its own thrusts and priorities. It seems that we are putting the whole thing back to front, and I would like to see a reassertion of national responsibility in these matters. That involves all the points that I mentioned earlier, but also involves ensuring that it is not just a departmental responsibility, but that it goes into the realms of higher education, the Civil Service and the parliamentary estate.
That brings me to one last issue—and I know that the Minister, who takes this matter very seriously, will forgive my mentioning it. There is one area in which, because of our insatiable demand for energy, we have a most critical issue. We have decided that it is necessary to have another generation of nuclear power. I cannot say that I am thrilled by this, but I am persuaded that it is necessary. Having been in government myself, I realise that decisions sometimes have to be made on balance, but once you have made them, the task is to get on with them as responsibly as possible. That is my general position on nuclear energy.
There is a problem, though, that we are going into the next generation of nuclear energy before we have started to solve the problem of the waste from the first nuclear generation. Scientists and others will tell us that we need not worry because the solutions are there, but the point is that we have not done it yet. I declare an interest as somebody who lives in west Cumbria. From another galaxy, we would look highly irresponsible for getting ourselves into a position now with this lethal stuff—which already exists and will have implications with gigantic dimensions for future generations hundreds or even thousands of years ahead—where we are leaving the decision as to whether we proceed with what is already on the map as a possible solution to the local authorities. I know many of the people in the local authorities and have great respect for them and admiration for their public service; but how do they begin to have at their disposal the expertise, knowledge and background to make key and critical decisions in this area?
This is a national responsibility that needs to be decided at the national level, even though of course we then consult with local authorities about the implications of how it might go forward. I would be far happier about the whole issue, as it develops in west Cumbria, if it was clear that, after bringing to bear the best possible minds, and scientific evidence, that we can as a nation, this was the best possible place to have it. We should have the best possible place in the UK, and not just somewhere that has been bamboozled, bludgeoned and bribed, if I may use the term, into having it. It is crucial that this is taken seriously, and we have all have a responsibility in this House for that.
I conclude with the theme I raised a little earlier. Whatever the point at which we dip in to these complex issues, I hope that we have not given up on strategic thinking in which we say, “Now look—efficiency, the cost, its social and environmental implications, and the safety of future generations cannot just be left largely to market forces playing, for example, against local authorities”. These issues demand national strategic thinking and planning of the highest quality.
Lord Whitty
My Lords, I am grateful to the noble Lord, Lord Teverson, for starting this debate and will go on to agree with quite a lot of what he says. However, I detected a note of slight depression in his voice at the paucity of attendance in this House, which reflects a rather longer-term lack of attention to energy efficiency in the spectrum of energy issues facing us. I was the Minister responsible for energy efficiency for several years in this House, among other responsibilities. When Defra had a debate on hunting about 500 noble Lords were here, but as soon as we got on to energy efficiency, we had about the same number as we have tonight. That reflects a bigger picture because energy efficiency is not sufficiently highly regarded in Whitehall and among other departments; nor, in many respects, is it among industry and society as a whole.
My basic theme tonight will be that the Government need to be much more aggressive in proclaiming the benefits of all dimensions of energy efficiency and in making sure that business and society get engaged in developing better energy efficiency in our country. The noble Lord, Lord Teverson, is quite right that the document that he referred to did not receive great publicity. It spells out all the benefits and some of the proposals for dealing with them, but it is pretty incomprehensible to the vast majority of people and was not picked up at all by the media. However, as it says, the return on investment pound for pound in energy efficiency is hugely higher than from the same amount of money invested in other aspects of energy and in most aspects of industry. The return is huge and, of course, energy saved is also carbon saved and is the most efficient way of saving on greenhouse gases.
We see a lot in the papers about shale gas, the nuclear option, whether Mr Putin is going to switch off the gas and the fact that there is a bigger coal burn than was anticipated in Britain, Europe and the rest of the world—all of which is setting back the kind of issues my noble friend Lord Judd referred to at the beginning of his remarks, in terms of climate change.
Energy efficiency is vital and we need to proclaim that from the rooftops, not add it on as the final chapter of every energy Bill and White Paper that we have seen over the past 20 or 30 years. We have to be careful not to overclaim, because as in the field of climate change and renewable technology, there are a lot of sceptics out there, who seize on any flaw in our argument. Energy saved is not 100% saved because there is a rebound effect and there are people out there who will therefore write off investment in energy efficiency.
Obviously, people use money saved from cutting their energy bills on other things, including more energy for something else or simply to keep their homes warmer. There is a rebound effect. The Government put it fairly low, at 15% for domestic consumers and almost nil for industry. It may be higher than that but it is never 100%; it is rarely more than 20% or 30%. It is a vast improvement to invest in energy efficiency, compared with investing anywhere else.
Of course, despite the fact that the public, business commentators and the media express very little interest in this area, we have had an era of hyperactivity from the Government, and rightly so. It was true of the previous Government—we did some good things, as have this Government—but we ought to be on the verge of a new era in this respect. We have the Green Deal, about to be launched properly—we have had a soft launch; I do not know if anybody noticed it—and we have smart meters. I never know why the two strategies are not combined because that would make a lot more sense to householders and consumers
We should recognise that a huge amount of work is being done by DECC in preparing for the launch of the Green Deal: accredited assessors are being trained, the products that are eligible for the Green Deal are being defined, the regulations are being put in place, and the Green Deal Finance Company is being set up. But this all starts in about six weeks’ time and there is hardly a punter out there who knows anything about it.
To a large extent, the same was true of smart meters. We now have standards for smart meters. In 2014 they become mandatory: all utility companies will be obliged to install smart meters in every home in the country, supposedly, over a period of five years—a massive conversion programme. How many householders actually know about it? About 40%, apparently, have vaguely heard about smart meters; a much smaller proportion know what they will do, how to use them and the benefits they will bring to consumers and society.
As a minimum, we need a major education and information campaign on these two programmes, and we need it now. It needs to be government-led; it must not be seen by householders as a marketing exercise by particular companies. Unfortunately, the companies involved in setting up something as complex as the Green Deal include energy companies and local builders, with banks providing the financial back-up. They are all absolutely needed and provide a huge amount of expertise, but they are not sectors that are hugely trusted by the average punter. We need that trust, which only government can convey.
The noble Lord, Lord Teverson, referred to the digital TV conversion. I was a bit sceptical that we would manage to deliver that programme, but of course it was delivered on a rolling region-by-region programme, whereas with the Green Deal and smart meters we are starting everywhere at the same time and hardly anybody knows about it.
We need a well resourced strategy of consumer information and engagement. Only a few weeks ago, the Minister said that we would be getting a strategy on engagement very shortly. Time is running out for 28 January. Will we get it before Christmas? Will we know what kind of programme is being run or supported by the Government before the Green Deal comes into play? Will we have a central delivery body, as elements of the industry advocate? At what stage will the Minister know the answers?
Of course, energy efficiency is not just about passive measures to improve the structure and resilience of buildings. At least two other dimensions should be included in an energy efficiency strategy. One is the issue of use. Even new buildings built to an extremely high standard do not in the event perform to that standard because the users do not know how to make maximum use of them. That is partly because the developers and architects are rarely the actual occupants and users; but there are also issues of product standards in our homes, in industry and in public buildings. The second dimension is the inefficiency in the system of distribution and transmission of electricity and gas, where a huge amount of heat is lost. We have never properly developed combined heat and power into being a normal part of industrial and domestic residential developments. Yet it can save 30% of what we generate in even the most efficient forms of energy generation, which disappears almost immediately into heat. We need far better development of our systems so that we use this heat and maximise the efficiency of the energy that we generate.
Some of the most obvious things are still a problem in parts of the country. I wrote a report last year on Northern Ireland, for example. The vast majority of households and small businesses in Northern Ireland still use oil for their heating, which is both expensive and extremely damaging in terms of carbon emissions. It would be much more efficient simply to connect them to the gas network. The same is true of parts of rural England and Scotland.
Almost my last point is this: the noble Lord, Lord Teverson, referred to the recent announcement by E.ON and the other energy companies. Clearly, price and the expectation of increases over the next few years will drive people and industry to look at energy efficiency more closely. However, the present tariff structure in our energy system for domestic consumers and in the contracts that the energy suppliers make with industry is doing exactly the reverse. We still have a situation where the more you use, the cheaper energy becomes. While the Government are struggling to make a reality of the Prime Minister’s commitment to offer everybody the cheapest tariff—I have a Question about this later this week—they should also look at how we can get Ofgem and DECC to move towards a tariff system that encourages rather than discourages energy efficiency.
Baroness Worthington
My Lords, I am grateful to the noble Lord, Lord Teverson, for initiating this debate which gives us an opportunity to discuss the Government's energy efficiency strategy. A number of noble Lords have commented on the fact that to date this has probably not received its due attention. It is a shame there are not more noble Lords in the Chamber, which again reflects the fact that the strategy is not receiving the attention it deserves. Energy efficiency and the management of our demand for energy should have a special place in energy policy as that is the only policy which directly addresses all three elements of the energy trilemma: namely, that we seek to reduce carbon emissions while increasing the security of supply and keeping costs low. Reducing our demand for energy meets all of those objectives. One would therefore assume that it would take centre stage in the newly published Energy Bill. However, a quick search of the Bill reveals that energy efficiency is not mentioned once and that demand reduction is only mentioned twice. This compares to nuclear which is mentioned 350 times. I acknowledge that this is a crude methodology, but it gives a clear indication of where the Government's priorities lay in the formation of that Bill. Nuclear may help to reduce carbon, and it does help to diversify our energy sources, but if press reports about the strike price are to be believed, it may not be cheap. Recent reports of yet more budget overruns in France, where EDF is building a reactor of the same design as that proposed for Hinkley Point, are not encouraging.
The one area of the Bill that talks about managing demand for energy is under the capacity market mechanism described in Chapter 3. This section is, however, merely enabling and there is no plan to introduce the mechanism before the end of the decade. A consultation document published alongside the Bill shows just how far we are from a well-thought-through demand reduction policy. Consultation on details is not expected until late 2013. Surely, if we are interested in meeting our carbon budgets and security supply objectives at least cost, this should be the first policy pursued. Why is it taking us so long and why do we not have a more clearly defined strategy? The answer is that, just as the department’s budget is dominated by spending commitments on nuclear waste and decommissioning, its intellectual capacity has also been absorbed with the question of how to ensure there is investment in a new fleet of nuclear power stations. I am not saying that those are not needed but we need to have balance in our policy. We really ought to be doing more on energy efficiency.
Chapter 3 sets out the carbon market mechanism. That at least provides an important stepping stone towards the valuation of services that reduce our demand for energy but there is no rationale for delaying implementation of this element. The sooner we start to work on how to manage our energy the better. Only then will we be able to ensure that we are building the capacity we need, not simply the capacity that we imagine might be needed. My friend in the other place, Alan Whitehead MP, has written extensively and eloquently on this topic and recently suggested that we should use the Bill to introduce a market for decapacity payments as soon as possible. This is an interesting idea worthy of greater exploration.
How we define decapacity payments would obviously need discussion but it could be that they are for those activities which deliver permanent and active demand reduction measures. This could help us to focus particularly on activities which reduce our peak demand. At the moment, we have a very difficult demand profile with big spikes in demand on winter evenings. Our supply system has to have enough capacity to catch these peaks, which means we always have a large surplus in capacity during the remainder of the year. This oversupply is currently at very high levels. When Ofgem warns that our supply capacity could fall to 4% above demand, it is quoting capacity in excess of peak, not demand in the intervening periods. If we can reduce the peak, we will not need to build as much replacement capacity to maintain that margin of error, saving everyone money.
The sorts of activities that could qualify for a decapacity payment include those which currently fall between the stools of existing energy efficiency policy. One example I have seen at first hand is voltage optimisation, which can be very effective. I visited Chaucer Technology School in Canterbury and saw how it had reduced its electricity bills by 13% through voltage optimisation, saving £8,000 per year. It is going to invest that money, alongside money saved by fitting a biomass boiler, in LED lighting. That is another technology that could be supported as a decapacity measure.
That investment by the school was facilitated by the Salix finance facility, a very successful policy introduced under Labour by the Carbon Trust. It provides zero-interest loans to public-sector buildings to invest in energy efficiency and demand reduction. To date, it has funded over 9,000 projects, valued at £194 million, which over the lifetime of the projects will reduce emissions by 4.5 million tonnes. The initiatives currently facilitated by Salix must be encouraged and incentivised across the country. It is quite notable that the Government’s energy efficiency strategy barely mentions Salix. It is there but only in an annex. Is the Minister aware of the work of Salix? Could she outline the department’s plans for it in the future?
To return to decapacity, as mentioned before, a number of technologies could be very usefully brought forward by such a mechanism. I talked about LED lighting and voltage optimisation. There is also smart metering, and efficient pumps and motors. These make up a big portion of our non-domestic electricity demand and should be incentivised more.
My noble friend Lord Whitty mentioned the use of tariffs. It is definitely true that with the advent of smart meters we should be able to have a much more flexible demand profile, moving our demand away from peak times and increasing the efficiency of our system. Those time-of-use tariffs could, when aggregated, have a very big impact on our system and should be supported as a priority. Could the Minister comment on the idea of the early introduction of a decapacity incentive mechanism in the context of Chapter 3 of the Bill? This could receive widespread support and we would encourage DECC to deploy more resources in this area.
In speaking about energy efficiency, it is usual to focus on the end use of energy and this evening noble Lords have, indeed, talked much about the numerous policies that exist in that area. I would like to focus a little on upstream energy efficiency which is an overlooked area of policy which we should take seriously. The efficiency with which we convert primary fuels—that is coal, oil and gas—into electricity is very important in defining how efficient we are in carbon terms across the whole system. Electricity generation is still the biggest source of CO2 and how we make it is therefore important. During the last dash for gas in the late 80s and 90s, we made significant reductions in our emissions because we replaced ageing coal plant with new, cleaner, gas plant. Not only was the fuel cleaner but the stations burning it were more thermally efficient. This is a very important point and there has been no progress in policy terms on it since then. So we find, in 2011, that the thermal efficiency of our gas plant is close to 50%, whereas our coal fired stations are only 35.7% efficient. In 2011 we relied on, and in 2012 are still relying on, these inefficient stations more than on gas because of high gas prices while coal stations are still operating at high load factors. Much of our old coal will come off the system but 20 gigawatts of old coal capacity will remain on the system, much of it built in the 1960s. We lack any direct strategy that addresses the energy efficiency of upstream electricity generation. The one policy that did exist—the IPPC directive—was lost when there was deregulation in favour of the EU Emissions Trading Scheme. That and other efforts to price carbon have so far, sadly, failed to provide a strong incentive. Will the Minister give assurances that the Government will include upstream energy efficiency in power generation? Can we expect measures to be brought forward that will help to improve the situation now and in the future?
I have spoken for some time without mentioning the policy which the Government consider to be the game-changer in respect of energy efficiency: the Green Deal. The noble Lord, Lord Teverson, mentioned it and I am grateful to my noble friend Lord Whitty for introducing it to the debate. I am not fully persuaded that this is the right policy to unlock these savings. I have worked in this area for a number of years and I have not noticed a huge demand from people asking for new loan structures to enable them to invest in energy efficiency. My fear is that, given that the interest rates are going to be relatively high and there will be penalties for early repayment, this might not deliver as we would hope. I hope I am wrong and time will, of course, tell. I agree with the comments of noble Lords that it needs a much more concerted effort to communicate this policy to members of the public and businesses. I am told that very many businesses simply assume that it does not apply to them. We have a very big education job ahead of us if this policy is going to succeed. I urge the Government not to become overly confident or complacent in expecting that the policy will deliver. It is entirely based on the desire of people to take it up, so we should not be using its existence as a reason not to look at other policies in this area. I noted a statement in the consultation document on demand reduction that there was a strong case that we do not need any more measures in the domestic sector because of the presence of this policy. I would urge caution, because it certainly has not delivered yet and we should still be looking at broad-based measures for demand reduction across all sectors.
I am running out of time, but I will finish by saying that we do not yet have an energy efficiency strategy: we have a very nice document, a lovely MACC curve and lots of fine words about the potential but, echoing the words of the noble Lord, Lord Teverson, we still do not know how the Government are going to get on and deliver. I urge them to do so.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I very much welcome the opportunity to focus on this particularly important aspect of energy and climate change policy. I am grateful to my noble friend Lord Teverson for raising this debate at a very opportune time. He raised a number of points which I, too, will touch on and feel are worthy of repetition. Of course, I will try to answer as many questions as I can. If there are any I cannot answer tonight, I will write to noble Lords and place copies in the Library.
Last month, the Government not only published the energy efficiency strategy but introduced the Energy Bill, which includes electricity market reform, a landmark change that will attract the investment we need to replace our ageing energy infrastructure with a more diverse and low carbon energy mix. As noble Lords have mentioned, we have also launched a consultation on how we can further encourage electricity demand reduction. Today, we have provided the details of how the CRC energy efficiency scheme will be simplified. We are making great strides in this area. I am disappointed that the noble Baroness, Lady Worthington, thinks that the Government are not doing enough. When the Bill arrives in this House, we will have plenty of time to discuss many of these issues.
All noble Lords have made some extremely important and considered remarks, even if I do not agree with them all. However, I agree with the noble Lord, Lord Whitty, that an extremely important subject such as this, which affects everyone, needs to have a narrative that is absolutely right and understandable. Perhaps we need to communicate our messages a little more clearly.
Although debated since the 1970s, there has not been a constant focus on increasing the UK’s energy efficiency. To address this, the Government created the Energy Efficiency Deployment Office in DECC in February this year. The energy efficiency strategy is EEDO’s first significant project and it provides the platform for energy efficiency policy for the coming decades. The strategy identifies the energy efficiency potential in the UK economy, the overarching barriers to achieving that potential and the actions that we are already taking to address those barriers.
As my noble friend mentioned, we could be saving 196 terawatt hours, which is equivalent to 22 power stations, through socially cost-effective investment in energy efficiency. Greater energy efficiency can be, and is, an extremely positive force in our economy. The energy efficiency sector in the UK already accounts for around 136,000 jobs in the UK and, during 2010-11, created sales of £17.6 billion. These sales have grown more than 4% per year since 2007-08 and are due to grow by 5% per year between 2010-11 and 2014-15. Nevertheless, energy efficiency has significant further potential in the UK. With the right market we could unlock further investment in energy efficiency, helping to generate further economic growth and jobs. Our analysis suggests that the Green Deal and the energy company obligation alone could support up to 60,000 jobs across the UK in 2015.
Investing in energy efficiency measures often requires local labour, can increase the productivity of the economy by releasing resources and, over the long term, can stimulate innovation. Developing a mature, knowledgeable energy efficiency market will also open up significant further export opportunities for the UK as the global effort to combat climate change ramps up. There are also savings to be made by householders and businesses. Research has suggested that, if no energy efficiency gains had been made since 1970, current energy use would be almost double its current levels, adding about £1,000 to the average domestic energy bill.
Improved energy efficiency also has obvious wider benefits, including reducing our greenhouse gas emissions and improving our security of supply. If we can reduce our demand for energy, we can achieve a cleaner, more sustainable energy system that is less reliant on primary fuel imports. Be in no doubt, energy efficiency needs to be a key part of our energy policy mix if we are to achieve our target of an 80% reduction in greenhouse gas emissions by 2050.
Achieving these multiple benefits is not easy, and the energy efficiency strategy makes clear the barriers that we face. We need to stimulate the market, ensure that consumers trust the information provided to them and make energy efficiency salient to those who could benefit from it. Society does not currently value energy efficiency as it could.
The Government are already taking significant steps to address these barriers and deliver the necessary culture shift. We are supporting consumers to cut energy waste and reduce bills by providing help to pay for and install energy efficiency measures. Our Green Deal and smart meters policies will help households make further efficiency improvements and put them back in control of their energy use.
The Green Deal has been designed to help energy bill payers keep their homes warm while saving money. It will help finance the installation of a broad range of improvements, including insulation, double glazing, microgeneration, lighting and heating. It will pave the way for one of the biggest retrofit programmes in our history. The first Green Deals will be available to consumers from the end of January, and the energy company obligation will provide extra help for those most in need and for properties that are harder to treat. Smart meters will give consumers near-real-time information on their energy consumption helping them to control and manage their energy use and make savings. Smart meters are already available, and energy suppliers expect to install significant numbers of smart meters before the start of the mass rollout at the end of 2014.
To address energy efficiency in the wider economy, we are also providing access to finance through the recently launched UK Green Investment Bank. This includes two specialist non-domestic energy efficiency funds, worth £50 million each. With the required match-funding from the private sector, this will create up to £200 million of investment to be spent by April 2015.
On 29 November, the Government also published the electricity demand reduction consultation. This sets out ambitious, economy-wide proposals to reduce electricity demand, building on the long-term strategic framework of the energy efficiency strategy. Taking measures to cut electricity use can be much cheaper than building new generation. Our analysis suggests that there is potential to go further than existing policies, so the consultation seeks views on different ways in which this might be done using market-wide financial measures or targeted financial incentives, such as scrappage schemes.
As a package of measures, our energy efficiency policies should deliver savings of 163 terawatt hours in 2020. This is an energy saving equivalent to 19 power stations. Our strategy is to achieve every bit of this potential, but also to look for more. It is innovative ideas such as the Green Deal, the Green Investment Bank and electricity demand reduction that will help make us world leaders on improving energy efficiency. Our efforts to achieve more will come in steps, and we cannot yet anticipate everything we will achieve cost-effectively, but the consultation is there on EDR, and we should debate what can be achieved. Next spring, we will consult on audits for bigger business and seek to understand the appetite for making audits have real impact.
I shall try to respond to some of the points that noble Lords have raised. My noble friend Lord Teverson asked about the transition period. Energy suppliers will continue to make available insulation measures as they continue to undertake mitigation action in the first few months of 2013. The Green Deal offers will begin to come online in January next year.
My noble friend also asked about a comparison with the digital TV switchover. We have sought to learn from the switchover but this is not like for like—the smart meter rollout will be different; it is also is led by energy suppliers and so it cannot be on a region-to-region basis. We are confident that the industry knows that it has to do a lot of work to ensure that information is available to consumers.
My noble friend also asked about our handling of the energy efficiency directive. As well as leading on the implementation of the energy efficiency strategy, EEDO will provide the central co-ordination point for the implementation of EU energy efficiency directives. Departments responsible for policies affected by each article will feed into EEDO, which will provide support and ensure consistency.
I am fast running out of time so I think it would be appropriate if I do my concluding remarks and then write to noble Lords. It would be unfair to skip over responses very quickly without giving some detail. I thank noble Lords for their important contributions and I look forward to future debates. I hope that noble Lords will support the Government in their endeavours to strengthen the energy efficiency market in the UK. Our strategy is an important document that sets out a long-term challenge for the UK but it is important also that it sets out an opportunity. It is clear that greater energy efficiency must be at the centre of UK energy policy in the coming decades. This country has an excellent record of using its resources effectively, and energy should be no different. In achieving an energy efficient future we can increase energy affordability, reduce carbon emissions and deliver a more secure energy system.