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The Minister for Climate Change and Industry (Mr Nick Hurd)
It is a huge pleasure to serve under your chairmanship, Mr Gapes. I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing a debate on an issue that will touch and affect every home in the UK. It has drawn quite a crowd of visitors, whom we should welcome. I also welcome the new hon. Member for Richmond Park (Sarah Olney) to her place. I thank the right hon. Member for Orkney and Shetland for the constructive way in which he framed the debate, which is exactly what I would expect given his record in the House. I acknowledge the valuable contribution of my hon. Friend the Member for Wells (James Heappey), who, as I have said on Twitter, is one of the more thoughtful Members of Parliament on the subject of energy. He is always interesting on the topic.
As the right hon. Member for Orkney and Shetland said, the roll-out is a good thing and a long overdue upgrade of an outdated system. I am talking about not just meters—the technology for which is basically 100 years old—but how smart meters fit into a broader and more ambitious strategy to upgrade our energy system, as my hon. Friend the Member for Wells alluded to. Liberal Democrat Secretaries of State in the coalition Government, in which both the right hon. Member for Orkney and Shetland and I served, wrestled with the trilemma of security, affordability and increasingly clean sources of energy. We are also dealing with the matter of how to make the system smarter and more flexible so that it delivers a better experience for our constituents—perhaps by doing away with the nonsense of estimated bills now that we are in 2016, and with calls to call centres. We desire to give our constituents a greater sense of control and, of course, the opportunity to save money.
The roll-out is not the silver bullet for fuel poverty—that is entirely right—but the data suggest that the people with the first wave of smart meters are saving about 3%, according to British Gas surveys. Those are not insignificant sums of money. For our constituents on prepayment schemes, smart meters are a better system for the ability to top up and to read balances quickly. We see smart meters as the foundation of the smart, flexible energy system that we are working towards and to which we are committed. The Secretary of State recently launched the consultation with Ofgem. That is the direction of travel, and we are extremely committed to it because there will be significant benefits to the country—not just to our constituents, but to the people we rely on to supply energy.
There is a smarter future ahead, and that is what we are working towards. The roll-out is unequivocally a good thing, but the right hon. Member for Orkney and Shetland was right to identify some big challenges, none bigger than meeting the roll-out target. However, I associate him with being someone of optimism and ambition—he is a Liberal Democrat, after all—so I say to him that we should not give up on our ambition at this stage. There is no basis on which to do so. It is a challenging target but, as he will know as an experienced politician, if we take our foot off the accelerator, people will read the wrong signals. We want to send a strong signal of our commitment to ensuring that every household and small business is offered a smart meter by the end of 2020. We will follow the evidence and see what it tells us about the feasibility of the target in a few years’ time. The right hon. Gentleman may be in a position to say, “I told you so”—he has teed that up nicely—but I hope not. Now is the wrong time to send a signal of slipped ambition.
There are other challenges, including making the early smart meters interoperable. The right hon. Gentleman is entirely right about that. We should not want our constituents to trade off the opportunity to get a better tariff against the opportunity to retain smart functionality. I assure him that the DCC has begun a project to enrol the early SMETSI 1 smart meters from 2018 in order to make them usable by all energy suppliers, rather than just the one that initially installed them. It is an issue, but one that will go away.
Another challenge that the right hon. Gentleman rightly highlighted is reaching all consumers, including those at risk of being left behind. That requires both a wide area network and a home area network. The DCC is contracted to provide wide area coverage to 99.25% of meter points in Great Britain from 2020, which is, incidentally, greater than for current television and mobile services. There are big challenges, but it is wrong to slip back on our ambition, not least because we can point to good progress being made.
The right hon. Gentleman mentioned a figure of about 3 million smart and advanced meters being in operation. Actually, as of June 2016—these are slightly out-of-date data—the official number is that there are more than 4.2 million smart and advanced meters operating under the programme. Again, we now have some data from the quite large British Gas survey, which show what cost savings the roll-out is delivering for our constituents. The current run rate is about 3%, which is slightly higher than expected. We now have a sense of how popular the smart meters are, with eight out of 10 people recommending them and high levels of customer satisfaction. We have also updated the latest cost-benefit analysis.
Mr Alistair Carmichael
I completely accept what the Minister says about the signals that can be sent by taking the foot off the gas, to use his analogy, but there are technical issues coming down the tracks. The suppliers are all telling us that the roll-out could take them into the middle of 2018. What is the Minister doing to engage with the suppliers to bring that date forward?
Mr Hurd
We are not naive about this. We have set a demanding challenge, so the ongoing conversation with suppliers to talk through some of the practical differences is an essential, fundamental part of the Government’s responsibilities and Ofgem’s responsibilities. I am keen to mention that we have recently published the latest cost-benefit analysis of this ambitious programme, which suggests that we are looking at a significant net benefit of about £5.7 billion for the roll-out—including through supplier cost savings, system benefits and energy efficiency for our consumers. That all leads me to reassert the fundamental point that we remain committed to the programme. The right hon. Gentleman suggested that ambition might have slipped a bit and that the scheme might have been a ball dropped by a busy new Department. That is absolutely not the case. The fact that the Secretary of State recently announced an ambitious consultation about the direction of travel towards a smarter, more flexible system places the roll-out in that context. It is a top priority for the Department.
I want to give the right hon. Gentleman some reassurance about his constituency. He spoke powerfully about the levels of fuel poverty there, and the data are striking. He was candid about the fact that this agenda is not the whole solution to that challenge, but his desire to ensure that no communities are left behind in the process is laudable, and is an aim that is absolutely shared by the Government.
In response to the questions on whether remote rural areas of Scotland be excluded from the roll-out and what the planned communications coverage will be, I would like to place on the record that Arqiva is contracted to provide network coverage to at least 99.5% of Great Britain’s premises in the north region, which covers Scotland, by the end of 2020. That level of coverage compares favourably with other technologies such as mobile and broadband networks. Arqiva is on track to deliver its contractual coverage commitments, having already achieved coverage of more than 80% of premises in the region. Building the smart metering wide area network in Scotland has led to considerable progress and, subject to detailed planning, the DCC is confident that the right hon. Gentleman’s constituency will have a high level of premises coverage. There is a licence obligation on the DCC to strive—best efforts—for 100% coverage.
I hope that I have given the right hon. Gentleman some reassurance regarding his constituency and the fact that, despite some slippage in timetable—a matter of a few months, which, in the scheme of things and against the backdrop to which he alluded, is not the end of the world—the Government and the new Department attach the right level of priority and importance to the roll-out, which we sincerely believe will deliver a much better experience for our constituents in interacting with the energy systems on which they depend. The roll-out is the foundation for a much smarter energy system as we move to upgrade the energy infrastructure of the country after so many years of dithering and delay. It is absolutely at the core of that strategy.
Question put and agreed to.