Renewable Energy
Baroness Featherstone
To ask Her Majesty’s Government what plans they have to move the United Kingdom towards an energy infrastructure that is based on renewable energy.
Baroness Featherstone (LD)
My Lords, this is a most timely debate and I thank all noble Lords who will contribute this evening. With the United Kingdom cast into a maelstrom of uncertainty and turmoil, this is a moment when we look to Her Majesty’s Government to stand by their commitments on climate change. Therefore, I hope and trust that, in responding to this debate, the Minister will take the opportunity to clearly reaffirm our commitments to the Paris agreement; to the EU target to reduce emissions by “at least 40%” by 2030—a target driven by the United Kingdom; to the renewable energy directive; and to our commitments in the Climate Change Act.
Moreover, will Her Majesty’s Government draft a UK-only climate plan to replace the one jointly submitted with other EU nations? Will it be stronger or weaker than the EU plan? I understand that the climate change deniers in this House are already on manoeuvres. Will the Government approve the fifth carbon budget at the level that the Committee on Climate Change has recommended—57% below 1990 levels? What now happens to the EU emissions trading scheme? I am sure that the Minister can see that last week’s events threw up a great deal of uncertainty and that we need clear answers.
The threat of climate change is severe. We have almost reached peak fossil fuels for electricity. Moving towards an energy infrastructure based on renewables is vital. We signed up to the Paris agreement. To meet that commitment we will need to make changes in this country to ensure that we deliver on those commitments.
I will make the Liberal Democrat position clear. We want to see net zero greenhouse gas emissions from the UK economy by 2050. Our vision is called Zero Carbon Britain and we set this out in the Liberal Democrat alternative Queen’s Speech 2016. We want to see renewable energy prioritised for government investment. We want to see greater investment in electric vehicles and low-carbon technologies. We believe that the United Kingdom should continue to work with our allies, regardless of being outside the EU, to ensure that ambitious international carbon emission reduction targets are met. For as we feel the reverberations of the insecurity created by the leave vote, we can already see clearly what uncertainty does to a country.
I trust that Her Majesty’s Government also understand what uncertainty on commitments to climate change does to investor confidence in the renewables industry. This Government, by changing at a stroke the assumptions on which renewables industries based their business models, have already shaken that confidence. This Government have ended support for new onshore wind power; sharply reduced support for other renewable technologies, including solar PV and anaerobic digestion; ended the exemption of renewable energy companies from the climate change levy; reduced the incentives to purchase low-emission cars; announced plans to privatise the Green Investment Bank; scrapped the Green Deal with no replacement; weakened the zero-carbon homes standard; added community energy to the list of sectors excluded from receiving tax relief; ditched the £1 billion budget for pioneering carbon capture and storage; ended the renewables obligation early—and on and on and on. The message that this sends out has become deeply concerning not just to Liberal Democrats but to environmentalists, the renewables sector and members of the public across the United Kingdom.
No doubt the Minister will point to the trajectory of renewable energy over the past 12 months to demonstrate that everything is on track, with UK renewable investments increasing by 25% in 2015, but I say to him that that trajectory gives a falsely positive position. We are still benefiting from the good work done by the coalition to set renewables on a strong growth path, and the impact of the Conservative-only Government’s decisions have yet to be felt. The total effects of the change to feed-in tariffs, for example, will not be available until the figures for the fiscal year ending in 2017 are published. While there has been a welcome surge in uptake for solar in recent months, this will also prove to be part of the false positive as it is a result of people rushing desperately to get their projects in before the subsidy is terminated. A crash in uptake will inevitably follow.
The outlook for the renewables sector is bleak, with job losses in solar alone predicted to be nearly 19,000 according to the Government’s own impact assessment, no forward plan whatever and the undermining of investor confidence. Can the Minister explain how, given their recent actions, the Government intend to meet their climate change and renewables targets—both domestic and EU—and confirm that they will retain those EU targets even though we are to leave the EU?
The capacity deployed by small solar power installations has fallen by 74% compared with the same period last year—so, to avert another axe falling on small solar PV, we need the Government to help the small solar industry by continuing to exempt renewable systems below 50 kilowatts from having to pay business rates from 2017. Will the Minister confirm that this exemption will not be altered? While we may be on track to deliver on power, we are certainly struggling to get anywhere near our targets in renewable heat and renewable transport. I hope that the Minister will say when we might see the plan for meeting all those targets.
I turn to wave power. When we Liberal Democrats were in government, we began talks to create the world’s first tidal lagoon energy project in Swansea Bay. Tidal power has huge potential for the UK and could eventually provide us with 8% of our energy needs. The Government have delayed the decision on the amount of subsidy to be offered to investors in the Swansea Bay tidal lagoon, again creating unnecessary uncertainty. In Scotland, the coalition proposed introducing a remote islands contract for difference as a mechanism to allow renewable generation to go ahead on the islands. This policy has since been repeated a number of times by a number of Ministers, including Energy Minister Andrea Leadsom in the House of Commons on 17 September 2015, but there was no mention of the island CfDs in the Budget. Will the Minister make it clear whether they are continuing to support the introduction of the remote island contract for difference and whether there is enough time to obtain state aid notification so that island projects can be included in the next allocation round, starting in the fourth quarter of 2016?
Scotland arguably has the most advanced wave and tidal industry in the world. But with the announcement of the second levy control framework period from 2021, it appears that there is no CfD support for any projects intending to be commissioned before April 2021. That in itself will lead to a slowdown of activity in a number of key areas, especially in the wave and tidal sectors where a number of flagship developments, including future phases of the world’s largest tidal stream project—MeyGen, in the inner Pentland Firth—would be put at risk. Moreover, there is no clarity on whether and how the second levy control framework will support the wave and tidal sectors—or indeed what decision has been taken on the second auction for contracts for difference, programmed for December. I would be grateful if the Minister would address those points in his response.
Lastly, I will move on to the economics of the renewables industry. The clean energy industry is reckoned to be worth trillions over the next couple of decades. In terms of employment and economic opportunity, we want to be seen as relentlessly pro-renewables and we need to demonstrate that commitment. From a position where Britain is already a world leader in offshore wind and could become a world leader in other areas such as tidal, we are now falling away in the global race. Countries around the world are starting to increase their investment in renewables—not surprisingly, due to the global political pressure to tackle climate change and internal pressure to improve air quality. This gives us huge economic opportunities to export. I suppose that if there is any silver lining this week, it is that our exports will be cheaper.
We should be seizing the opportunity to invest more now while we have a comparative advantage, rather than giving others the chance to get ahead of us. The Renewables 2016 report by REN21 says that about £196.5 billion was spent globally on renewable power and renewable fuels, making 2016 a record year. As a wake-up call, I have to say that the majority of that expenditure—more than £107 billion—was spent in countries such as China, India and Brazil. The speed with which the renewables sector is developing and becoming cheaper is incredible and we do not know what is just around the corner. The level of subsidies needed is shrinking and, as soon as ways are found to store energy cheaply, there will be a radical shift. It is happening and change is coming. According to a new forecast by Bloomberg New Energy Finance, it is coming not just because coal and gas are running out but because cheaper alternatives are already arriving apace. We should be nurturing this and becoming ready for it. In fact, we should be at the cutting edge and ahead of the curve.
On interconnection, storage and demand-side response, we need to stop thinking of energy supply as needing to be centralised. We need policy framework certainty; we must know the direction of travel; we need to encourage and allow innovation. All this is not just for ourselves but for the amazing impact that this innovation could have on the lives of those in developing countries. The ability to generate and store solar power, for example, would be a total life-changer for millions in the world’s poorest nations, providing huge possibilities for addressing global poverty and mass migration.
We need a Government demonstrably committed to the renewables agenda. We need a Government to come forward and state loudly and proudly their continued commitment to that agenda. As the UK departs from the EU, we need to hear loud and clarion clear that Her Majesty’s Government are committed to doing equal or better on all our commitments, whenever and with whomever they were made. I therefore very much look forward to the Minister’s response.
Earl of Stair (CB)
My Lords, I thank the noble Baroness, Lady Featherstone, for tabling this very relevant and important Question. Perhaps it is rather unfortunately timed, quite so soon after the events of last week. Much of the energy under discussion this evening originates from areas of the United Kingdom which, sadly, may no longer be part of it in a couple of years’ time. I am not sure where our system of interconnection will stand after the proposed separation from Europe, although I hope the interconnector being replaced between Scotland and Northern Ireland will still be of some use.
I welcome the plans for low-carbon production of energy by 2050 and support the 15% increase in generation of electricity from renewables in the last five years, and the increase in energy from renewables to 19% of all United Kingdom electricity. Perhaps surprisingly, I also confidently support the Government’s continued development of nuclear power but regret the line currently taken by the Government in Scotland. However, I would still prefer to undertake further research and development on a future use for radioactive waste, rather than simply deep-storing it.
My speech can be fairly brief tonight because I do not want to focus on the question of generation or the end use of renewable electricity but rather, the bit in between. The issue as I see it is neither the motivation nor the opportunity to produce renewable electricity. There is plenty of water in the hills for hydro-electric schemes and water in the sea for tidal power, when it is developed, and timber and other material for biomass burning, as indeed there is plenty of space for photo-voltaic panels in areas where land is available and not too intrusive. Continuous improvements in panel efficiency are opening up more and more areas for solar power.
Our current national grid system of interconnection gives us a good infrastructure for high-voltage transmission and storage of power, both nationally and internationally. The grid is designed to be broken down into distribution networks managed by smaller operators to bring the power to end users, decreasing ever more in capacity the further it goes into remoter areas. However, the end of the line is often where most of the renewable energy generation sites are located, as identified in the National Infrastructure Commission report, Smart Power.
These generation sites, often some distance from the grid, are now starting to require more network capacity. The Beauly to Denny line in Scotland, energised last year, and the two others still being constructed are prime examples of the requirements to increase capacity from renewable sites to wherever the energy is required or where it can be fed into the grid. As the House of Commons Energy and Climate Change Committee identified in its report, Low Carbon Network Infrastructure, it is the very slow investment in developing and updating these distribution networks which is going to obstruct the future development of renewable power use in UK. We are already ahead of our targets for energy from renewable sources, but how long will it be at the present rate before we have filled the capacity of existing infrastructure and further use of renewable energy is frustrated by lack of capacity?
I will cite one example, in south-west Scotland, where the necessary upgrading of power line capacity will not start until early 2020 and is not likely to be energised until at least 2023. When this question was raised with a Scottish Government Minister last year, his reply was that although renewable generation came under the Scottish Government, anything to do with the grid was strictly a matter for Westminster. Can the Minister throw some light on the progress in prioritising the upgrading of distribution networks and where in the United Kingdom they will be? How is the strategic plan being developed, beyond the three networks mentioned earlier, to enable the continued expansion of renewable energy and more renewable energy projects to be developed?
Lord Teverson (LD)
My Lords, I very much welcome this debate initiated by my noble friend Lady Featherstone. One of the statistics that particularly struck me when I was researching this subject was that, as we came out of recession post-2008, in 2011-12 the renewable energy industry, or green industry generally, accounted for some 30% of growth. At a time when the UK economy is under challenge because of Brexit and other issues, it is really important to debate this focus on the way forward for the green economy and the savings it can provide for the long term. Although I am not going to talk about this, I very much echo the noble Earl’s focus on distribution capacity in certain regions of the United Kingdom—in Scotland but also very much in the south-west.
The area I want to concentrate on this evening is one that my noble friend has already mentioned but which is often not included in these sorts of debates: the renewable transport infrastructure. We often forget that transport accounts for some 28% of emissions in this country—not including international emissions from shipping and air—which is a major proportion. More importantly than that perhaps, as we know from Kyoto, Paris and beyond, we measure our effectiveness on emission reductions in this area against a 1990 baseline. I do not know whether noble Lords are aware of this, but despite our good performance in electricity generation, as the noble Earl mentioned, since 1990 we have reduced transport emissions by 2%—over 26 years, we have managed to reduce those emissions by a mere 2%. That means that our current target under the 2020 European agreement for greenhouse gases—a 10% reduction in transport emissions from 1990 to 2020—is very unlikely to be met on our current trajectory. Vehicle efficiency is good, but the only way we are going to significantly reduce those emissions is through the introduction of electric vehicles, whether they are driven by, I hope, renewable electricity generated through the grid or by hydrogen cell technology. The latter gives greater range—up to 300 miles—and allows recharging in as little as three minutes, which is like filling up your car with petrol or diesel at present.
I have a couple of questions for the Minister. I welcome the work being done by the Office for Low Emission Vehicles, and the number of registered plug-in vehicles has risen from some 3,500 in 2013 to 63,000 this year to date. But a lot of those vehicles are hybrids and have a range of only 20 or 30 miles. They are not mis-sold exactly, but are something of a “greenwash” effort by certain manufacturers to get subsidies and do not really meet the challenge of creating a genuinely renewable transport system in this country. Are we going to increase our research in this area, particularly into hydrogen cells? I was going to say that the Government have been bragging, which is not fair, but the national network of hydrogen stations they have been talking about will be only 12-strong by the end of the year, which is not great national coverage. How do we accelerate this? At last, we have a cultural change whereby electric vehicles are starting to be acceptable, but to go further, we need the range to be greater and refuelling to be quicker, and confidence in a network of charging points that is available to everybody. This is one of our greatest challenges in terms of emissions and meeting our renewables targets under the 2020 regime, and an area we therefore need to focus on in the future.
I am afraid I cannot declare an interest, because I do not have a plug-in vehicle myself. That may be hypocritical of me, but I am waiting for a vehicle at a sensible price that has the right range and which I can refuel quickly. I commend those people who have bought plug-in vehicles so far. I am one of many who are desperate to move on before I trade in my 10 year- old model. I hope the Minister can give me an assurance that there is a way to promote this. I have one last statistic: as I said, 63,000 plug-in vehicles have been sold up to 2016, but that is only 1.4% of total vehicle sales. We still have another 98.6% to go, and I hope the Minister can reassure me on this and encourage me in my hope that change will happen rapidly.
Lord Grantchester (Lab)
My Lords, I congratulate the noble Baroness, Lady Featherstone, on securing this debate today, which enables us to consider and take stock of the UK’s energy policy position and direction under the new Conservative Administration, one year on from the 2015 election,. The noble Baroness is correct to highlight how important renewable energy and the low-carbon economy are to the UK. More than 11,000 businesses are engaged in the low-carbon economy, directly employing more than a quarter of a million people and indirectly a further 200,000—potentially a growing opportunity for the UK to create a high-skill, low-carbon economy.
Against the international backdrop of the Paris accord, Bloomberg New Energy Finance’s New Energy Outlook 2016 reports that renewable energy will generate 70% of Europe’s power by 2040—up from 35% in 2015. In the UK, renewables technologies have been growing rapidly to reach a 25% share of all electricity in 2015. More broadly, low-carbon electricity’s share of generation, including nuclear, increased to 45.5% last year.
Sadly, since the May 2015 general election, policy changes and mixed messages have created uncertainty over financial support and further new investment. Your Lordships’ House debated the renewables obligation closure order, the early closure of onshore wind schemes, the huge 65% cuts to feed-in tariffs for smaller solar schemes, the ceasing of support to biomass conversion plants, the scrapping of the zero-carbon homes programme, the ending of the Green Deal scheme for home efficiency, and uncertainty regarding the future of carbon capture and storage. The noble Baroness, Lady Featherstone, was again correct to underline how this risk to energy investment has undermined investor confidence and is having an impact on household bill payers, because more risk means more cost.
The House of Commons Energy and Climate Change Committee’s report, Investor Confidence in the UK Energy Sector, in March 2016 listed as its first factor of six that have combined to damage investor confidence:
“Sudden and numerous policy announcements have marred the UK’s reputation for stable and predictable policy development”.
Predictably, Ernst & Young’s attractiveness index for international investment in energy has shown a drop in the UK’s ranking to 13th place, arguably jeopardising UK energy security, going against the grain of almost universal global support to bring renewables through to a support-free regime.
Let us be clear that it is recognised that the Government will, despite the votes of last week, remain committed to reaching our climate goals, to fulfil our emissions reduction targets and to decarbonise our power supply. They are to be congratulated on plans to phase out unabated coal by 2025, but they are sending out horrible mixed messages and non sequiturs. Yes, it is recognised that the cost of the levy control framework is rising from its present total of more than £5 billion to perhaps more than £10 billion in 2020, but the lack of transparency over government evidence for their argument that this amounts to overspending on renewables is undermining their credibility. On the one hand the Government are understandably aware of the cost of energy on household bills, but on the other they are picking technologies such as shale gas and CCS, which are unproven, and new nuclear and offshore wind, which are substantially more expensive. Investors cannot understand what the Government are trying to achieve.
Furthermore, the Government’s mishandling and the extent of the industry’s lack of belief in the department was highlighted in your Lordships’ Secondary Legislation Scrutiny Committee report on the renewables obligation closure order 2016. It reported that at two stakeholder workshops that the department undertook, respondents questioned its rationale, as no transparency was provided for the figures for the levy control framework and no evidence was provided to detail the breakdown of the LCF overspend.
The Energy and Climate Change Committee has called on the Government to set out clearly the purpose of the LCF and to explain why the capacity market is not currently included, when it is clearly an electricity policy that results in levies on consumer bills. Yes, it is right that we need to control costs, especially when the poorest households pay more for their energy as a proportion of their income than more wealthy households, but if the Government are focusing on the LCF as a determining factor in low-carbon energy technologies, it is vital that the framework becomes coherent with the utmost urgency. That the Government have not done so is of great regret. I ask the department to undertake this work immediately.
Just as technologies such as solar are standing on the cusp of becoming subsidy-free and economically competitive, the Government’s slashing of subsidies is killing off thousands of jobs. Yet, shortly after capping subsidies, they announced potential subsidies to diesel generators, one of the most polluting energy forms available. The cuts to subsidies also included community schemes. Under present conditions, the sector will not be able to continue at scale. What plans does the department have to encourage the community energy scheme and the sector in future?
The change needed to decarbonise the economy does not point only to the renewables energy sector. It must also refer to low-carbon generation, and it is right that we should also take account of the wider context that includes nuclear and carbon capture and storage, among others. In his reply, will the Minister outline the latest position regarding Hinkley Point C? Is he confident that the technology remains robust and the timetable for becoming operational in 2025 is still realistic?
In a very recent publication, the Energy and Climate Change Committee also reported on the low-carbon network infrastructure. It reported that transformation of the UK’s infrastructure is already occurring. The noble Earl, Lord Stair, highlighted in his remarks how those distribution changes need to occur even more quickly. Electricity generators used to be predominantly large, centralised plant connected to high-voltage, long-range transmission networks. Now, significant quantities of generation are connected to low-voltage, short-range distribution networks. These are new challenges where innovative solutions need to be developed, including a focus on battery storage and heat decarbonisation technologies.
I recognise and applaud the Government’s announcement in the 2016 Budget to allocate at least £50 million to help innovation in energy storage, demand-side response and other smart technologies. Can the Minister give the House an update on when the Government expect widespread take-up of storage and how effective that will be in helping to match supply at peak demand?
Key technologies also include heat decarbonisation and carbon capture and storage. As I said earlier, the Government cancelled the planned competition to develop greater use of the CS technology. The department’s estimates predicted in 2013 that:
“By 2050, CCS could provide more than 20% of the UK’s electricity and save us more than £30 billion a year in meeting our climate targets”.
What future do the Government see for CCS technology, and what are their plans for the sector?
In my earlier comments, I mentioned energy efficiency and how the Government scrapped the Green Deal. While not commenting on the merits or otherwise of the scheme, the importance of energy efficiency and conservation is not to be overlooked. When do the Government expect to reply to the Energy and Climate Change Committee’s report Home Energy Efficiency and Demand Reduction?
A recent Carbon Brief analysis showed how the department for energy has downgraded its expectations for each of the main low-carbon sources of electricity in this year’s projections. The analysis lays bare the consequences of policy changes introduced since the May general election. The forecasts suggest that it will now be harder for the UK to meet its legally binding carbon budget for 2028-32, which is likely to be delayed past the deadline of the end of June. Has the Minister any news of the Government’s response to the climate change committee’s advice on that fifth carbon budget? I am also grateful to the noble Lord, Lord Teverson, for his remarks on the transport sector and how vital it is that it is not ignored.
In contrast to low-carbon sources of power, the department is now forecasting higher deployment of new gas-fired generation capacity, particularly into the 2030s. The expectation of 27 gigawatts of new-build gas, up from 16 gigawatts last year, could lock the UK into continued fossil fuel use into the 2030s, when gas- fired electricity is supposed to be on the way out. Can the Minister comment on the analysis that these policy changes are likely to increase the UK’s emissions?
Against the context of the Paris accord, it is now imperative that the Government restore confidence in the low-carbon economy. They must position the UK as an expert partner on low-carbon delivery by supporting and encouraging the low-carbon technologies of the future and maintaining the UK’s international climate leadership role. To quote the National Infrastructure Commission:
“The UK is uniquely placed to lead the world in a smart power revolution. Failing to take advantage would be an expensive mistake”.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Featherstone, for raising this topic in the House once again. I also thank all noble Lords who have participated in this short debate.
I start by attempting to answer the questions on Europe that have understandably been raised by many noble Lords, starting with the noble Baroness, Lady Featherstone. There were a number of questions about our position in terms of energy and climate change, given the result of the EU referendum and bearing in mind that the nation is still digesting the result and its implications. I hope I can give some reassurance on certain issues.
The first thing to say is that, as we stand at the moment, there will be no immediate changes and the Government will continue to deliver on their agenda in this sector. DECC is committed to making sure that consumers have secure, affordable and clean energy now and in the future. The noble Baroness, Lady Featherstone, asked whether the UK will continue to be in the EU emissions trading scheme. We remain a member of the EU and we will continue to engage with EU business as normal and will be engaged in EU decision-making in the usual way. Once Article 50 is invoked, we will remain bound by EU law until the withdrawal agreement comes into force. The period between invocation of Article 50 and our eventual exit from the EU is two years, unless other member states agree to extend it.
On the same theme, the noble Lord, Lord Grantchester, raised Hinkley Point, and I understand why. The final investment decision is a commercial matter for EDF. However, the British Government and EDF are confident that Hinkley will go ahead. There is no change. The French Government also remain fully committed to the project, and EDF is on record as saying that Hinkley Point C will be on time and on budget. I hope that gives some reassurance. That is the position as we see it at present.
In addressing the main content of this debate, I shall begin by taking the House back to last autumn and the clear direction the Secretary of State set out for the UK’s energy policy. This is based on three core priorities, which are that energy must be secure, affordable and clean. That was followed by the UK’s instrumental role in securing the Paris agreement, which demonstrated the strongest possible ambition and commitment. This debate therefore gives me an opportunity to reiterate our strategy for delivering on these priorities.
First, for a secure supply we need a smooth transition to a diverse mix of low-carbon technologies. The shift from unabated coal to gas is critical: gas produces half the carbon emissions of coal when used for power generation. As we have said, we will shortly launch a consultation on when to close all unabated coal-fired power stations, but we are deliberately not rushing in. We will proceed only if we are confident that the shift to new gas can be achieved in time, so we have announced key changes to the capacity market that will send the right signals to investors and ensure that new gas plants are built. Alongside this, with a strong regulatory framework already in place, we are encouraging investment to explore our shale gas potential so that we can add new sources of home-grown supply to our well-established imports.
The Government are clear that new nuclear will be a critical part of the mix. We are working closely with industry on its proposals to develop 18 gigawatts of new nuclear power. This could deliver around 30% of the electricity we will need in the 2030s and bring an estimated £80 billion of private investment into the UK, employing around 30,000 people across the supply chain at the peak of construction.
Of course, this is not just about electricity. Heat accounts for around 45% of our energy consumption and one-third of all carbon emissions, so it is vital that we change how we produce and consume it. We need to test different approaches to understand which technologies can work at scale and keep costs down for consumers. The Government have already announced £300 million over the next five years to support district heating infrastructure, and we will say more on our wider approach later this year.
That leads on to renewables, the focal point of this debate. We should be rightly proud of the progress made since 2010. The noble Baroness, Lady Featherstone, certainly acknowledged this and the role of the coalition Government in taking us to that point. In 2015, renewables provided nearly one-quarter of the UK’s electricity, outperforming coal for the first time. That puts us within shouting distance of Germany, which reached 27% just two years ago, and is pretty remarkable considering the low base we started from. This is thanks to government support securing significant investment: last year was another record year, with £13 billion invested, bringing the total to £52 billion since 2010.
That said, I turn now to the second pillar of our strategy: the review of subsidies and reducing costs. This was also alluded to by the noble Baroness, Lady Featherstone. Subsidies could not continue as they were. I am sure noble Lords on all sides of the House will agree that we should not overcompensate technologies or pay for renewables at any cost. Costs of established technologies have come down significantly, so it is right that they stand on their own two feet. The cost of domestic solar installations has fallen by two-thirds since 2010 alone. So when the Government identified a significant potential overspend on renewable support, we were right to take the necessary action, but we also took care to protect investor confidence and put the sector back on a sustainable footing.
We are looking to the future and giving industry the certainty it needs. We will hold three competitive CFD rounds this Parliament, including one this year, allocating £730 million of annual support for new renewable projects delivering from 2021-22 onwards. This will deliver value for consumers and target support at less-established technologies, giving us a real opportunity to build on our world-leading position on offshore wind. We have more than five gigawatts already installed, more than any other country, and could support another 10 gigawatts in the 2020s if costs come down.
The final pillar of our strategy is unleashing innovation to develop cost-effective, green technologies. The noble Baroness, Lady Featherstone, spoke passionately about the need to innovate in this sector, and she is correct. Looking at the domestic level, perhaps I might ask a few searching questions of us all? How many of us think about the energy saved by turning the heating down or switching appliances off standby? It is not just homes but offices, too. How many of us wonder why all the lights, not just one, are blazing at night in an empty building? How many of us sit in our homes in shirtsleeves when we could turn the heating down and put a jersey on? I speak as a Scotsman in that respect.
On a serious note, changing the behaviour of individuals and companies is critical to our approach, so the Government are thinking about such questions as improving energy efficiency and reducing demand. It is one of the reasons why all homes will be offered a smart meter by 2020. A recent survey showed around a 3% reduction in gas and electricity consumption on average for those with smart meters. It is why we are allocating at least £50 million for innovation in smart technologies over the next five years, recognising the role that they could play to deliver our priorities cost-effectively.
In his interesting speech the noble Earl, Lord Stair, raised an important point about smart technology and renewables, which is that they benefit the grid. We are aware of the challenges that could face networks as we continue make strong progress on renewables and decarbonisation. The National Infrastructure Commission published a report on smart power earlier this year looking at some of these topics and identifying significant opportunities. The department is continuing to work closely with the National Infrastructure Commission on this point.
At national level, we recognise that solutions to the challenges we face may now be an idea on a drawing board. New technologies do not just appear out of thin air. That is why we are committed to supporting innovation, and it is why Innovate UK has developed a series of 11 world-leading catapult centres to transform the UK’s capability for innovation in specific areas and help to drive future economic growth. The noble Lord, Lord Teverson, raised the importance of the development of electric vehicles and driverless technology. That brings home a point that is quite close to home for me as I live in Milton Keynes. With the driverless pod experiment leading the way, it is going to be incredibly interesting to see how this technology is going to take us forward. I am grateful to him for bringing that up.
To give some reassurance to the noble Lord, I can tell him that the Department for Transport will consult later this year on proposals to do more on transport, while DECC will publish its emissions reduction plans later this year, setting out plans for decarbonisation across different sectors. It is good to see that the Government are working closely on this.
DECC’s innovation budget has more than doubled for 2016-21 to over £500 million. For example, we recognise the potential of small modular reactors to complement large-scale nuclear power, offering possible cost reduction and commercial benefits to the UK. We are investing £250 million over the next five years in an ambitious nuclear research and development programme, including a competition to identify the best-value small modular reactor design for the UK.
There were a number of questions from the noble Baroness, Lady Featherstone, which I shall attempt to answer. She asked whether the UK would undertake its own decarbonisation plan. Our working assumption is that by the end of 2016 we will publish our new emissions reduction plan, which will set out our proposals, and, as mentioned earlier, we are working with colleagues across Government to identify the necessary action to take.
The noble Baroness also raised the point about the delays in Swansea Bay, to put it succinctly. We believe that as it stands the latest proposal from TLP is too expensive for consumers to support, so more thought is going to be given to that. Perhaps it is some reassurance to the noble Baroness that an independent review will help to establish the evidence base with regard to what decisions need to be made there.
The noble Baroness and the noble Lord, Lord Grantchester, asked whether the Government would adopt the Committee on Climate Change’s level for the fifth carbon budget. The committee gave its advice in November 2015, and that was to set the budget at a 57% reduction from our 1990 base. We are looking to make an announcement shortly on the level of the fifth carbon budget, so I hope that is some reassurance.
The noble Lord, Lord Grantchester, also stated that we were not as transparent as we might have been about the levy control framework. Many of the assumptions that underpin the framework forecasts are already in the public domain, but we need to take account of the commercial sensitivity that limits the release of some of the more detailed information. However, we will provide an updated set of healthier projections, as well as the assumptions underpinning the latest forecasts, as part of the consumer-funded policies report, which will be published later this year. The noble Lord also asked about carbon capture and storage. We have not closed the door on this; it has a potentially important role in the long-term decarbonisation of the UK. The costs of CCS need to come down, as the noble Lord will know, and we will continue to work with industry to support the development of the technology.
I hope that the noble Baroness can be reassured that contrary to what has been said in previous debates, though not this one, we have a clear strategy focused on a diverse technology mix, lowering costs and unleashing innovation, which will deliver the secure, affordable and clean energy we need for the future. We have made significant progress delivering on this already, and our new emissions reduction plan later in the year will complete the picture, setting out our proposals for meeting the carbon budgets and decarbonising through the 2020s across different sectors of the economy.