Fuel Poverty
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My noble friend raises two key issues, and it is right that we address both of them. Our policy is to improve living standards for people in fuel-poor homes by trying to increase their energy efficiency. Our energy company obligation strikes at the heart of fuel poverty and is seeing nearly 400,000 low-income homes and vulnerable households helped since it started last March. The Green Deal, of course, is also a very important part of our policy approach.
Lord O'Neill of Clackmannan (Lab)
My Lords, can the noble Baroness tell us when the strategy will be announced, which is what my noble friend—whom I am delighted to see back in the House—asked this morning? Those of us who are associated with organisations such as National Energy Action are getting rather impatient at the length of time that this is taking to be produced. The statistics are now available. A number of schemes such as the Green Deal have been a failure, and the Warm Front scheme was withdrawn last year and nothing as yet is in its place. If we are having an improvement in the economy, surely those living in hard-to-heat homes, who are vulnerable and poor, should be among the first to enjoy the benefits of this apparent and claimed return to prosperity.
Baroness Verma
The noble Lord wants to know about the announcement. We will be announcing it shortly. However, we need to make sure that we have got it absolutely right. I would argue with the noble Lord’s assertion that the Green Deal has not delivered. It was started last year, and already more than 230,000 Green Deal assessments have been carried out. Therefore, I beg to differ with the noble Lord’s approach to the Green Deal, and it would be harmful to the industry that is trying very hard to address energy efficiency measures within homes if we have such a negative approach from the party opposite.
Energy: Green Deal
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Lord O'Neill of Clackmannan (Lab)
How much have the Government spent on promoting the Green Deal, to the satisfaction of 1,754 people as of the end of last month?
Baroness Verma
My Lords, more than 500,000 measures have taken place. The noble Lord, Lord O’Neill, expects a 20-year programme to produce an overnight success. This Government have decided to adopt long-term plans. Unlike the party opposite, which for 13 years refused to invest in the energy sector, this Government have a plan and have introduced the Energy Act, which has put renewables and low-carbon fuels on an equal footing alongside fossil fuels.
Energy: Action on Bills
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, I thank my noble friend Lord Deben for his endorsement of the Statement. Like him, I am very concerned that we meet all our commitments, particularly on carbon emissions, which are not just important for us but a global problem that we all need to work on. I remind the House that, since we came into government, we have seen a reduction in carbon emissions, perhaps not of the scale and size that we would like, but it is going in the right direction: 4% is still better than the rising emissions that we were seeing.
Lord O'Neill of Clackmannan (Lab)
My Lords, before the noble Baroness gets carried away with the reduction in carbon emissions, it would not be unreasonable to remind her that we have had one of the worst economic slumps since the 1930s. The level of industrial activity made a bigger contribution to that than any policy of the Government—although one might say that their economic incompetence has had a role to play.
As someone who is a member of a couple of the fuel poverty charities—I have an interest declared on this—I would say that at best those charities would give a guarded welcome to this. Perhaps the Minister could tell us when she anticipates an impact assessment being published on these measures. If we are going to have a serious debate on this in the weeks and months ahead, we have to have some kind of independent assessment of what is taking place.
It is also fair to say that at best this is a reduction in price increase; it is nothing much more than that. At worst, it still means that far too many households are now going to have to wait longer for any improvement in their insulation. As the Minister has said, the fact that there is a cut of some 30% means that the money will be spread thinly over a longer period.
The Minister said that the failure of the Green Deal can be excused by the fact that it is a 20-year project; it is only a 20-year project for people who have to pay it back. The idea is that people will come into the scheme and will have up to 20 years to pay. I cannot imagine that Governments will still be flogging this dead horse 20 years from now. People who are living in cold, hard-to-heat houses want treatment this year, not in 2033.
Baroness Verma
My Lords, when the noble Lord speaks about economic downturns, I have to remind him that it was his Government who were in charge of that. It was his Government who oversaw the worst economic problems that this country has ever faced in peacetime, so let me just put that on record. Since 2010, we have had to make some really difficult decisions, and those decisions have had, in part, to be taken because of the incompetence of the party opposite for 13 years when it was in charge.
On the impact assessment, I told the House that we will see something early next year. I really regret that the noble Lord keeps putting down the Green Deal, given that it gives so many jobs to small suppliers. I say to the noble Lord that we need to encourage the growth of the Green Deal, because it supports small and medium-sized enterprises across our great country.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I start by thanking all noble Lords for a very full and informed debate. I thank my noble friend Lord Jenkin for reminding the House of the warm welcome from the opposite Benches for us taking forward this measure. It is really important that we all agree that something must be done. What has been done in the past has not been enough. We need to be working far more constructively together to get solutions, particularly for those who are most vulnerable and least able to respond. I also thank my noble friend Lord Deben. He is absolutely right: any measures that we take here will have an impact somewhere else in the world. It is really important that we are mindful that this Bill is in part there to help decarbonisation. The bigger picture is to play our role in helping other countries, which can look at how we are putting those measures in place.
I also thank the noble Lords, Lord Whitty and Lord O’Neill, for their amendments, because they enable me to clarify a little further points that I made in Committee so that they feel reassured that this Government really take seriously the issue of fuel poverty. We take the issue no less seriously than the previous Government did, but the measures that were put in place were not working well enough. We need to make sure, therefore, that what we are doing gives better results.
Noble Lords have rightly highlighted the seriousness of fuel poverty; it is because of this that we are committed to tackling this. This is why we made the amendments in Committee which will set a new target and put in place a new strategy for tackling the serious issues around fuel poverty. This framework will allow us to maintain a concern for fuel poverty beyond the current date of 2016. That concern needs to be set out in legislation. However, the right balance must be struck between what is set out in primary legislation, what is subsequently laid out in secondary legislation and what is included in the strategy, to maintain an appropriate use of parliamentary time and level of government accountability.
I turn to Amendments 104C, 104D, 104E, 104F and 104G, which would put a specific target for fuel poverty in the Bill, and limit the changes that can be made to the target as well as proposing a review of that target every two years. We proposed setting the target through secondary legislation as we felt that this struck the right balance between the certainty of legislative targets and the need for flexibility in the future. The flexibility will, for instance, be important to reflect changes in the way energy efficiency is measured over time. The setting of the target, and any changes to it, will be subject to full parliamentary debate and the importance of that debate is why we have proposed that these are subject to affirmative resolution by both Houses.
We know from Professor Hills’s independent review that the way in which we understand the problem, as well as the best ways of tackling it, can change over time. Primary legislation is not the appropriate vehicle, given the importance of a nuanced, flexible approach to tackling fuel poverty.
I agree with noble Lords that we must be ambitious if we are to be successful in tackling fuel poverty, and the strategy must be a comprehensive one. However, it is neither sensible nor appropriate to put this level of detail into primary legislation. We will bring forward proposals on both the fuel poverty target as well as the strategy in due course, both for public consultation and, subsequently, for a full debate by both Houses.
In the mean time we will continue to deliver policies to tackle one of the main causes of fuel poverty, which, as noble Lords have already mentioned, is living in cold, draughty homes. The energy company obligation is set to deliver permanent energy savings in 230,000 households by the end of the year, including for the hardest-to-treat homes. We anticipate the ECO affordable warmth and carbon saving communities obligations should generate investment in home thermal efficiency improvements equivalent to around £540 million per year. As a result of the ECO, we should see more than 60,000 boilers—which were mentioned by the noble Lord, Lord O’Neill—being installed in fuel-poor homes, as 60,000 have been installed since the policy was launched in January.
Lord O'Neill of Clackmannan
Before the noble Baroness leaves this point, I accept the procedural point she makes, that it is difficult to put detail of the character of which we were talking in the Bill. However, we are entitled, some five months after the initial welcome that we gave to the incorporation of the Hills principle, to some greater detail than a simple rehash of what we are doing this year. We want an indication of what will happen in subsequent years, in advance of the consultative document being produced. At the moment, from what the Minister said, the Government do not seem to have a clue what they are doing in that respect.
Baroness Verma
My Lords, that is very harsh of the noble Lord. I am trying to lay out clearly the direction that the Government are taking. The measures that we are taking are crucial to addressing concerns which he raised. I have addressed the issue he raised about boilers. Of course we are taking measures now but we need to make sure that, although there is ambition on all sides of the House to do more, we get it right in the long term.
Amendments 92A and 92B specify that the strategy and policy statement and the Gas and Electricity Markets Authority’s duty in relation to the statement must include the strategy and objectives on fuel poverty. The Government take the need to address fuel poverty seriously, and are already bringing forward proposals to do so. These amendments are therefore unnecessary. The contents of the SPS will be subject to consultation and parliamentary approval. Placing a particular priority in the Bill would pre-empt this consultation and the ability of the Secretary of State to start with a clean sheet in considering the full range of energy policy.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Lord O'Neill of Clackmannan
My Lords, I start by declaring an interest: I am a vice-president of National Energy Action and the president of Energy Action Scotland. The Government have made some moves on this issue in the course of the Bill’s passage, but it would help if they would add to the list of objectives they have set themselves the one concerning fuel poverty mentioned in this amendment tonight. That would be a signal that this is not an issue of party conflict, and indeed that the Government have recognised that one of the deficiencies in the Bill is that insufficient attention was initially given to fuel poverty.
Now that we have had recognition, we can probably argue about the niceties when the appropriate time comes. We are all in favour of the earliest possible elimination of fuel poverty. It is not just about prices. It is about handling our grossly inadequate housing stock. Before too long we may well have to look afresh at the Green Deal that at the moment has, as far as I know, attracted something like 57 successful completions—one for every one of Heinz’s varieties; that is perhaps all that one could say about the proposal. People may find the money and find it attractive to accept the Green Deal at the 7.5% interest that is being charged, but I very much doubt it.
More has to be done on this. It would be helpful to have a clear indication that an opportunity is available with this amendment to put in the Bill, as one of the overarching targets of the Government’s energy policy, that we should as a high priority be able to eliminate fuel poverty. If we all agree on it, why is it not there? It is not a particularly controversial amendment. It is one that would enhance the credibility of the Bill and make easier the passage of future elements in it, which I am sure the Minister is looking forward to bringing before this House.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendment and all noble Lords who have taken part in this short but important debate. It gives me an opportunity to lay out the Government’s objectives for reform throughout the development of the EMR proposals. These objectives have been set out in the published documents, from our White Paper in July 2011 and within Clause 5, to reflect our aims of reform. This does not mean that other aims, such as minimising fuel poverty, are not important. I agree with noble Lords that this area is incredibly important to us all. As outlined in Clause 5(2)(d), the Secretary of State will have regard to the likely cost of electricity to consumers. This means all consumers, including the fuel poor.
Our analysis suggests that, as a result of EMR, household electricity bills will be on average around 9%, or £63, lower per year over the period 2016 to 2030, relative to what they would have been if decarbonisation were achieved through existing policy instruments. The impact of EMR will be to reduce fuel poverty compared to what it would have been without those policies in place.
However, we should not be complacent. With or without EMR, electricity prices are likely to increase over time due to rising fossil fuel prices and the rising cost of carbon. This is why we have in place a strong package of measures to support low-income and vulnerable households with their energy costs. The energy company obligation ensures that help goes to low-income and vulnerable households to enable them to heat their homes more affordably on a long-term basis. Through the affordable warmth and carbon-saving communities obligations, we anticipate that support should reach around 230,000 low-income households each year. In addition, this winter around 2 million households will get help under the warm home discount scheme, including over 1 million of the poorest pensioners, who will receive £135 off their electricity bill.
In the last financial year, winter fuel payments helped over 12.5 million older people in over 9 million households with their fuel bills, providing between £100 and £300 tax-free to help pay for heating bills. During the same period, 5.8 million cold weather payments were made, targeted at those households that are most vulnerable to the cold. This Government are committed to helping the fuel poor, now and in the future. That is why earlier this year I proposed amendments to the Warm Homes and Energy Conservation Act, to put in place a new, rigorous and flexible framework for measuring the Government’s progress in tackling fuel poverty in England. As we move forward with ensuring a safe low-carbon future we must be absolutely sure that we do not leave the fuel poor behind.
The noble Lord, Lord Whitty, mentioned the Prime Minister’s announcements last week on green taxes and the review of their impact on the fuel poor. The Government are looking at how to get people’s energy bills as low as possible to help the very families to which the noble Lord refers. We are already increasing competition by bringing new players into the market to offer consumers real choice. The most vulnerable are getting direct help with their bills this winter. We will continue this work to make sure that consumers get a better deal. No one is talking about changing support for large-scale renewables or feed-in tariffs. We want to make sure that those who need help get help. I hope that the noble Lord, Lord Whitty, finds my explanation reassuring and on that basis will withdraw his amendment.
Energy: Winter Supply
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, I am always grateful for my noble friend’s very helpful questions and I reassure him that the Energy Bill is relevant to the Question because it brings forward all the measures we need for long-term security in energy at a competitive price. I think that I have already answered the Question: we have enough energy there and we have the measures in place to be able to respond to any short-term fluctuations, so I hope my noble friend will be reassured that his lights and our lights will stay on.
Lord O'Neill of Clackmannan (Lab)
My Lords, does the Minister agree that the Energy Bill is still deficient in one respect at least—carbon targets? Were carbon targets to be included in the Bill, it would be a clear indication to investors of the Government’s intent in this area. At the moment, nobody really knows how green this Government want to be. The absence of these targets is the surest confirmation that their energy policy is a shambles.
Baroness Verma
My Lords, the noble Lord really needs to look at our record. We have seen an increase of 56% in renewable energy, which will bring down carbon targets. We have committed ourselves, but we cannot see a target put in place against a global backdrop of what we do not yet know. We need to ensure that we are leaders, by having our carbon reductions at the forefront; we also need to ensure that our trading partners look at their carbon emissions. We need to do this collectively, not singularly as a country on our own.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, for the amendment. I understand the concerns she has raised regarding the potential for conflicts of interest to arise between National Grid’s existing businesses and its new EMR role.
The Government want to use the best people for the job of delivering electricity market reform. The national system operator within National Grid is well placed to succeed in the task of delivering contracts for difference and the capacity market. The expertise it will bring to the role is the reason we gave that role to the system operator in the first place. For example, there are strong links between the capacity market and the existing range of balancing services that the system operator currently provides.
In addition, the system operator has the relevant technical expertise and the commercial and financial skills to ensure that the capacity market can be delivered in an efficient way—for example, through the modelling of future supply margins and the delivery of auctions. The system operator is also uniquely placed to understand the implications for the electricity system of different technology mixes brought on by contracts for difference, ensuring that we have the highest quality analysis on which to base our decisions on how we support low-carbon technologies.
The matter of conflicts of interest that arise between National Grid’s existing businesses and this new role was identified at an early stage. That is why we have worked closely with the regulator, Ofgem, over the past 18 months to assess thoroughly the potential conflicts that might arise and to consider how best to manage them. The process has involved extensive engagement with stakeholders, including a call for evidence and a public consultation.
In April we published the findings of that joint work with Ofgem, together with our analysis, which included an impact assessment. The work with Ofgem and independent analysts showed that the risk of conflicts being acted on is small, which is why we will be putting proportionate measures in place, using the powers proposed in this clause. That approach retains the valuable synergies with the system operator’s wider role, and gives confidence to those who need it: industry, investors and, I would hope, this House.
Neither the Government nor Ofgem assumes that this is the end of the process. While I am confident that the proposals we have made are up to the task, we will keep close watch over the situation so that industry can be certain that any conflicts, real or potential, can be managed appropriately. The exercise of these powers potentially has significant implications for National Grid’s business and it is not a decision that the Government would take lightly.
We must always keep in mind the factors that make the system operator the best organisation for the job, otherwise we risk losing the benefits of having the system operator perform the EMR delivery role. That is why the measures must and will be targeted and proportionate. We do not want to put in place a disproportionate response to the problem, which would lead to us sacrificing the synergies and all the benefits to consumers that flow from them.
The noble Baroness asked whether the provisions in the Utilities Act 2000 and the Electricity Act 1989 need to be updated in the light of EMR. We are proposing specific powers in this Bill that would enable us to put in place specific measures to protect sensitive information relating to EMR. We have worked with Ofgem to decide how to use those powers and set out the detail publicly. Therefore we do not consider that the changes that the noble Baroness proposes are in fact necessary. I hope that the detailed analysis that we have carried out with Ofgem and our public commitments on how we will tackle these conflicts of interest will mean that the noble Baroness feels content to withdraw the amendment.
Lord O'Neill of Clackmannan
Before the noble Baroness sits down, what is the competence of DECC and Ofgem in deciding what a conflict of interest would be? As I read it, the amendment has two parts. One relates to National Grid and the other to a responsibility on the department, which does not normally deal with competition issues as such. What expertise does the department have? In the event of there being a dispute which is not resolved to the satisfaction of both sides, is it possible for an offended party to appeal to any other competition regulatory authority?
Baroness Verma
The noble Lord raises a very important point. As he is aware, when we need to look at specialist areas we bring in experts to oversee DECC’s work. We have worked closely with Ofgem which, as an independent regulator, is well placed to have expertise within it. As I have said throughout, we are mindful of the need to keep an eye on this and we will keep it under review. If areas need improvement we must ensure we are able to move in and do that immediately. We are not just setting it in place and then leaving it. We recognise that specialisms may need to be involved and we will continue to look at the proposals set out in the Bill.
Lord O'Neill of Clackmannan
I am sorry, but I do not think the Minister has quite understood my point. In the event of one of the parties not being satisfied with the breadth of expertise brought to bear, the external experts and what have you, is there anywhere else they could go to appeal? I am not talking about some vexatious litigant but about a disgruntled utility that might feel there ought to be some form of review, outwith the department, with one of the competition authorities. Is there that option, in the event of a dispute about conflict of interest?
Baroness Verma
My Lords, rather than delay the Committee, it would be more prudent to write with a more detailed response. That might satisfy the noble Lord, Lord O’Neill.
Lord O'Neill of Clackmannan
We have had an interesting debate that was kicked off by the noble Lord, Lord Stephen. Before telling us about the need for electricity storage, he told us that, as a Minister in the Scottish Government, he was in favour of moving towards 100% renewables. His speech had a certain revelatory note as though, when he was advocating 100% renewables, he had not really thought about storage. If you are dealing with renewables, you are of course dealing with interruptibles and you have to have something to fill the gap. Storage has always been one of those things. I find it a bit disturbing that the Scottish Government—of whom my party was a part at the time—signed up to what seems to be a somewhat ill-considered approach to renewables. However, it shows that when something with an element of newness and freshness comes along, it is thought that it must be good; and once its goodness is established, everything is possible. I get the message this afternoon that everything involving storage is good and therefore possible. I happen to be in favour of storage and in favour of a strategy, but if we are going to have a strategy, it means that there will be priorities. If there are priorities, it means that some of the projects now enjoying the cosy embrace of Members of this Committee on both sides may well be cast to the wind.
On the question of cost, the energy industry is saddled with bad investments from the bright ideas bank, but that is something which goes back through history. When the sector was publicly owned, the CEGB had probably the best scientific brains in the energy industry. They would go to civil servants and offer them, for example, nuclear energy—of which I am an enthusiast—saying that it would be too cheap to meter. We have got to be a lot cooler in our enthusiasm. It might well be that the advocates of a strategy find that the strategy turns round and punches them on the nose, knocking out some of their favourite little schemes.
I happen to be something of an enthusiast for the Leighton Buzzard project because it is of a reasonable size and it seems to be technically in order. I have a slight association through an interest in this area, which I have already declared. However, we have to be careful. I favour the concept of a strategy because it will instil a bit of discipline into what I think is the wishful thinking that has prevailed in so much of today’s discussion. I am not sure whether we are going to get very much more in the way of pump storage, as you need to have the terrain and the water. I remember talking years ago to people in the hydro industry in Scotland and they did not think there was really very much more that you could eke out of the Scottish landscape. That might have changed by now, but the point is that we are getting to the small and cuddly bits of technology.
We have all been hounded over the years and, indeed, over the last few months, by people coming and saying, “With a bit of money from the Government, we can change the world and make a fortune for ourselves”. I get a wee bit cynical. Perhaps it is because I have been in this game for far too long and have seen so many of these schemes founder. I want us to have a strategy and I think that we should have storage, but let us not lose our sense of proportion. At the end of the day, we will not be storing that much because it will be the surplus electricity. We will not be generating for storage purposes. It will be a case of storing the extra, the margin and the bonus. Let us keep a sense of proportion so that when a strategy is produced, we are ready for the fact that some folk may be disappointed because they did not get everything they wanted. We have heard already with regard to renewables the arguments beginning, “Ah, but” and, “It was not really intended like this” or “The nasty Chinese are now undercutting our prices. We must stop them coming in. We must impose taxes in this area because the Germans and the Spaniards have invested in photovoltaics and the like, which are not making the returns that once they did”.
If the Government take on board the spirit of this amendment, produce a strategy in due course, and give it a place within the newly reformed electricity market, let us make sure that that is done on the basis of serious priorities. We should not be pushed by every pressure group or commercial interest that comes along with some half-baked bright idea which, with a few million pounds more of public money, will resolve everything. Often we find that the UK comes to a scheme rather later than other countries, which have spent a lot of money on similar projects and then rejected them. There is a lot to be said for partnering with other countries and companies because they may have done far more research and experienced a lot more of the disappointments that normally arise from research in areas of this nature. We should give the spirit of the amendment a fair wind, but at the same time recognise that this has to be about priorities. We should not chase after every pot of gold at the end of every rainbow we see.
Baroness Verma
My Lords, I am grateful to my noble friend Lord Stephen and to all noble Lords who have contributed to this very helpful and useful debate on Amendment 55D. Subsections (a) and (b) of the proposed new clause support the development and piloting of storage systems for electrical energy. The Government agree that technologies that can be used to help balance the supply and demand of electricity, such as energy storage systems and demand-side response and interconnection, are increasingly likely to be required. This was the conclusion in DECC’s report, Electricity System: Assessment of Future Challenges, which was published in August 2012.
Energy storage systems can be used to store surplus electrical energy for use at times of high demand. They help to match the supply and demand of electricity efficiently and cost-effectively. Technology companies in the UK and elsewhere are actively developing energy storage systems which could help to address the problems associated with intermittency of supply. However, different energy storage technologies are currently at different stages of development and further innovation and development is needed to reduce the costs and thus make storage technologies applicable to wider deployment.
The department therefore identified energy storage systems as a priority area for funding under its Innovation Programme. We then consulted with storage technology developers and users, as well as other public sector innovation funders, before developing a plan to help support the development of storage systems. This led, in October 2012, to the department launching two innovation competitions to support research, development and demonstration of energy storage systems. As a result of these competitions, funding has already been awarded to 16 energy storage projects, and in the autumn DECC expects to announce details of up to four energy storage demonstration pilots, which it will be supporting during the current spending review period. The aim of these pilot projects is to demonstrate the scope for cost reduction of innovative energy storage technologies and to explore the opportunities for deployment of energy storage technologies to address a wide range of future UK electricity network balancing and other storage needs. I agree with the noble Lord, Lord O’Neill, that this should be part of fulfilling the capacity of needing more energy rather than it being a means to an end.
Under Ofgem’s Low Carbon Networks Fund, three pilot projects are already under way to incorporate storage into our electricity distribution networks. These projects have the potential to assist in balancing local demand to facilitate the timely and cost-effective connection of renewable energy. My noble friend Lord Stephen referred to the Leighton Buzzard six megawatt battery project, which is one of the three pilot storage projects being supported by Ofgem’s fund.
I turn to subsection (c) of the amendment, the proposal to set targets for the provision of renewable energy storage capacity. Energy storage systems are one way to address issues arising from intermittent supply and so to support the deployment of renewable generation. However, other mechanisms such as demand-side reduction, interconnectors and smarter networks can also be used to help to balance supply and demand. Different mechanisms are likely to be needed to meet different balancing applications depending on the characteristics they offer, such as power, duration of supply and response times. The commercial markets should be best placed to select the most cost-effective solution to address each balancing requirement.
Energy storage of all sizes will have the opportunity to compete alongside generation and demand-side response in the capacity market. This will provide a secure revenue stream, ensuring sufficient investment in the reliable capacity we need. Of course we recognise the importance of developing a more responsive demand side for the longer-term efficient functioning of the market. Given that certain technologies such as storage have different characteristics from generation, we are developing transitional arrangements to provide particular support to demand-side response and alternative capacity types, including smaller scale storage which is connected to the distribution rather than the transmission network.
As I have set out previously in our debates, the early stages of the capacity market will include “go early auctions” for specific technologies in 2015 and 2016, which are designed to help certain emerging industries to grow. We envisage that these auctions will include demand-side response, embedded generation below a size threshold and storage connected to the distribution network. The auctions will allow storage to take on limited obligations and benefit from regular guaranteed payments.
Finally, subsection (d) of the amendment would require the Government to set out progress made on these energy storage system issues in the form of a report which must be laid before Parliament. DECC is already planning to carry out post-project evaluation on the outcomes of the energy storage innovation schemes once the supported projects have been completed. In response to this request, I can commit that copies of this evaluation information and project reports will be deposited in the Libraries of both Houses.
I shall pick up on a couple of points that were raised during the debate. My noble friend asked how much funding DECC is putting into current projects. There is a list of things that we are doing and I have highlighted one or two of them. In spring 2013 we awarded £500,000 to a total of 12 organisations to carry out phase one feasibility studies into innovative and diverse energy storage ideas under the Energy Storage Technology Demonstration Competition. We will invite some of the innovators who have won funding under this competition to take part in the second demonstration phase of the competition, which is worth up to £17 million, to test designs on the ground. We also awarded £1.5 million to four organisations in the first round of the Energy Storage Component Research and Feasibility Study Scheme. We will also award grant funding of up to £1.5 million for winning projects in the second round of the scheme. There are a number of things that the department is already doing.
Energy: Electricity Supply
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, as I have said on a number of occasions at the Dispatch Box, the Government have taken very seriously the point that we need to ensure a diverse source of supply of energy. Among them, of course, are the renewable sector and nuclear.
Lord O'Neill of Clackmannan
My Lords, in the nuclear sector, will the Minister care to tell us how far we have got in the negotiation of a strike price? It was suggested some time ago that EDF was in a mood of cautious pessimism. Are we moving towards cautious optimism or is it just stalemate, as it has been for the last year and a half?
Baroness Verma
As the noble Lord knows, I am a person of great optimism and the negotiations are ongoing. We should be optimistic about what this country can offer for nuclear and for renewables.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, it might be wise for me to write in detail to the right reverend Prelate and the Committee with a fuller answer.
Lord O’Neill of Clackmannan
Given that the Minister is not opposed to the amendment in principle, if the words “12 months” were removed from it and the amendment were to be retabled on Report, would she look at it in a more sympathetic light?
Baroness Verma
I see that the debate has changed the mind of the noble Lord, Lord O’Neill, but, as with all debates in Committee, I shall go away and look carefully at Hansard to make sure that I have understood the debate fully.
Lord O’Neill of Clackmannan
I am just an old hand at this game. Ministers who do not have very much to offer Committees sometimes throw them bones and say, “We like the principle but not the text; were you to change it, we might look sympathetically at it”. That is the kind of thing that prevents unnecessary tensions and allows people to leave with a wee bit of a skip in their step. I was merely asking because I am sure that some of the old greybeards on the noble Baroness’s side would say that that is one way of throwing bones to other Members. Is she in a bone-throwing mood?
Baroness Verma
My Lords, as I have said, I read Hansard with great care to see what responses I can give to noble Lords, but I consider every amendment very carefully and, of course, pay great consideration to each and every point that is raised.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, I thank all noble Lords for their warm welcome—even though from the Benches opposite it was perhaps slightly lukewarm. The noble Lord, Lord Whitty, and I genuinely share a concern about fuel poverty and I am extremely grateful that he recognises that the target that was put in by the previous Administration has not worked to alleviate fuel poverty. Something needed to be done and we have an approach that has been reviewed and put forward independently.
I will start by responding to the wide range of interventions. I thank my noble friend Lord Jenkin for his extremely warm welcome for the amendments, and all noble Lords who took the time to attend yesterday evening’s briefing. My noble friend is absolutely right, as are other noble Lords, that we really need to address issues around fuel poverty, and about how important it is that we retain a flexible approach and respond to the change in dynamics across England. I am extremely grateful to my noble friend Lord Jenkin for laying out eloquently and with great precision what the Government are trying to deliver. I, like him, when I first came across some of the statistics at which we have to look, was quite puzzled. I have been extremely grateful to my officials for explaining to me, perhaps for longer periods of time than to noble Lords, exactly how they work.
My noble friend also mentioned the gas grid, and the policy of gas grid extensions. Through the fuel-poor network extension scheme, which is part of the new price control arrangements known as RIIO, the gas distribution networks will be required to connect 80,000 fuel-poor households to the grid over the period of 2021. I can confirm that this is not adversely affected by the new definition. We can of course work with the sector on this, including the fuel poverty advisory group, to ensure that those who would benefit from being off-grid can access and benefit from our proposals.
Lord O'Neill of Clackmannan
My understanding of the concern of the noble Lord, Lord Jenkin, was that there was an implication that the figures to be connected to the gas grid were going to be far greater. Therefore, that would have a difficult impact upon the existing investment programme for the national grid. Are we being told that they are getting exactly the same number of households connected but possibly in different places?
Lord Jenkin of Roding
Perhaps I can help the noble Lord, Lord O’Neill. The point that has been put to me on behalf of the national grid is that it does not yet see what the change in the target would mean for their investment programme. I endorse very much my noble friend Lord Deben’s point that there is now an element of uncertainty. It is that which needs now to be resolved as quickly as possible. I am sure that they will respond firmly to the invitation which has been issued for discussions to take place. Certainly, I do not know and have not been told whether this means investment in different places for different communities. They do not yet know enough about it to be able to make that sort of decision.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan(11 years, 4 months ago)
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Lord O'Neill of Clackmannan
Given the large sums involved and our positions as members of that body, we must do that. There are various elements involved in fuel poverty: the condition of the house, the circumstances of the individual householder and the nature and size of the energy tariffs that the individual has to pay. Very often, people in fuel poverty are in comprehensively complicated social circumstances and the complexity of the tariff system just adds to their confusion. Quite often, they do not know what they are paying for. Quite often, they do not understand the bills. Invariably, they are unable to make full payment. If they are on the payment meter system—as has already been said—they pay rather more for the privilege of paying as they go but that normally enables them to self-disconnect, in the sense that if they cannot afford to pay they do not use electricity.
One of the statistics that is never given proper examination in arguments about privatisation is that we say there are not the disconnections that there were under public ownership. That is because nowadays people self-disconnect. There was a time when, certainly as a young Member of Parliament, I had a succession of cases where I would intervene with the nationalised industry, the utility, to ensure that the gas or electricity was restored and some kind of proper payment system introduced. In some respects, you might say that for a Member of Parliament that is a chore they no longer need to carry out but it was certainly one that enabled people to come to terms, at least for a period, with the straitened circumstances of fuel poverty. What we have to do here, regardless of the off-the-cuff remark from the Prime Minister, which I am sure he regrets having made—not because he did not believe in it but because of the complexity of the issue; this is a classic case of unintended consequences—is to take advantage of the legislation to make the tariff system for electricity intelligible, simple and, I hope, more affordable. My noble friend has addressed a number of the challenges that that remark presents to us.
We know that in some respects there has been a major shift. There has been the publication of a report, which I confess I have yet to read, and amendments, in which we will all take great interest. It is fair to say that the Hills report was a wee bit of a curate’s egg, but there are always problems with the oversimplistic definition of the 10% rule. Perhaps we can get a change in the definition that enables us to target and prioritise. I know that those are the kind of words that people like to use in these circumstances. In the previous debate, we discussed having an annual report on energy. We will be looking very carefully, maybe not next year but the year after next, when a number of these amendments will have kicked in.
It is important that we have a debate like this and that we get from the Minister a clear picture of the Government’s thinking in relation to tariffs. The remedies for fuel poverty in a broader sense will be debated later, but people know well enough that serious near-criminal activities have been undertaken by the oligopolies. People say that the market works, but it has not worked; it has been abused consistently and methodically by cynical people who at the end of the day pay the fines in the certain knowledge that we as consumers then have to make our contribution to the compensation of the poor shareholders, who have been happy to have these chancers running these businesses. That is where we are coming from on this; a group of cynical manipulators of the tariff system have made the plight of disadvantaged people even more disagreeable. The rest of us can probably say, “It serves us right—we should be looking after ourselves”. However, a lot of vulnerable people have not been given any protection by the market, and we are now looking to the Minister and her response to this debate to tell us how we are going to get tariffs that people can understand and perhaps pay a little more easily than they have been able to in the past.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendments relating to this very important area in the Bill. Like him and all noble Lords, I share huge concerns that the most vulnerable tend to be the ones who do not benefit from what should be a system in which they are able to easily access information. That is why I am going to start my remarks by responding to the noble Lords, Lord O’Neill and Lord Whitty.
When the noble Lord, Lord Whitty, opened his remarks he said that the Prime Minister threw this upon us. The Prime Minister, this Government and this department are all at one in making sure that we put into place a system that enables consumers to have choice, to be able to make decisions and to understand what they are paying for. The noble Lord cannot have it both ways; we want to have a stronger regulator and the Secretary of State therefore has to have a duty to ensure that the regulator has the powers to enforce. Of course, it is necessary to let the regulator be independent and do the job that it should be doing, but the real issue is that this is not a new issue; it is one that has blighted Administration after Administration. My noble friend Lord Cathcart said that time and time again we have failed. We bring in Energy Bill after Energy Bill or some form of Bill to try to address these issues, and we do not seem to be able to do it.
I hope that through this Bill, the powers that we are taking, the powers that we are giving to the regulator and the legislative framework that we are introducing to redefine fuel poverty, we can start to address some of the root causes of why we cannot get on top of something that I know every noble Lord in this Room is passionate about. Providing statistical backing to the Energy Bill has served to focus minds on avoiding delay in the implementation of the retail market reforms that Ofgem is introducing. Ofgem has committed to reviewing the RMR package of measures by 2017 to ensure that it is working efficiently. In addition, we will be able to check.
I shall speak to the noble Lord’s amendments as they came up, and then I shall answer some of the questions that the noble Lord raised. Amendment 50A would give the Secretary of State power to require licence holders to offer particular tariffs that are designed to reduce fuel poverty and energy consumption and to encourage consumers to use energy at off-peak times. We have a competitive energy market and we are looking to increase competitive pressure through these reforms. I understand the noble Lord’s desire to see the issues set out in Amendment 50A addressed, but I assure him that the Government are doing so, though through means other than mandating suppliers to provide particular tariffs. I shall quickly run through them. We are increasing energy efficiency and conservation though ECO and the Green Deal. We are facilitating consumers to change the time profile of their consumption through the rollout of smart meters. We are already addressing fuel poverty by reducing the bills of vulnerable customers with the warm home discount, and I shall touch on that a little later.
I hope that noble Lords will also welcome the amendments to this Energy Bill that the Government have brought forward specifically to address fuel poverty. We will come to them later in our Committee’s consideration. These are all important areas, and we are addressing all the concerns that noble Lords have raised with me in the Room and outside it. We do not think that mandating particular tariffs in a competitive market is the way to do it because ultimately the market has failed to provide that, as the noble Lord, Lord O’Neill, said. We need to make sure that we place a duty upon suppliers to ensure that consumers are able to generate the competition that suppliers need to be working towards to be able to give consumers the option to switch to a different supplier if they are not being served properly.
Amendment 50B seeks to require that tariffs offered do not discriminate between different methods of payment except where there is a clear reflection of differing costs or differing debt levels. We should guard against suppliers discriminating between customers using different payment methods. That is why standard supply licence condition 27.2A states:
“Any difference in terms and conditions as between payment methods for paying Charges for the Supply of Electricity shall reflect the costs to the supplier of the different payment methods”.
Ofgem’s proposed licence condition changes for the retail market review do not remove or alter this licence condition. We would not intend to alter it were we to use these powers to implement the proposals. The noble Baroness, Lady Maddock, asked whether consumers can be put on the cheapest fixed rate. Yes, they can if they chose to. It would be the cheapest tariff in line with the preferences that they decided on.
Amendment 50D would have the effect of requiring suppliers to include a signpost to the unit cost of each tariff on bills alongside the cheapest tariff message. I fully support the principle behind the noble Lord’s amendment. Improved transparency and information provision are key to helping consumers engage with the market, and that includes providing information about unit costs. However, the improvements that Ofgem is delivering through its retail market review will ensure that consumers have all the information to make those decisions. We are giving legislative backing to these proposals, which require suppliers to summarise these costs in a single figure in order to aid comparison. That figure will appear on bills and other regular supplier communications.
The noble Lord, Lord Whitty, mentioned the TCR, the tariff comparison rate. We think that the TCR is a useful prompt to encourage consumers to engage. Ofgem’s proposals are clear that the TCR will be indicative and based on typical energy consumption. It is intended as a prompt, a call to action. During the course of any sale, suppliers will also be required to give all consumers a personalised quote based on their consumption, which will tell them how much they will actually pay.
Lord O'Neill of Clackmannan
Before the Minister sits down, when she says that the companies are “not obliged”, I find it difficult to understand her choice of language. It is as if we are asking them to do something difficult. At best, we could say that we will just aim at the top six, or top seven if we included First Utility. The other side of this is that, such is the stickiness in this market, most people do not switch, so that 60%-odd are receiving their bills from the same company year after year. We have been far too easy on these companies, and the Minister gives me no comfort whatever by using phrases such as “not obliged”. We should dashed well make them do it; we have the powers to do so. The regulator can do these things. It might be uncomfortable for the regulator but the consumer is entitled to know. I hope that she goes away and reflects on whether or not we should make the obligation rather more forceful than it currently is.
Baroness Verma
My Lords, as I said earlier, I am taking the amendment away and shall reflect on what the right reverend Prelate the Bishop of Chester has raised. Like noble Lords, I am very keen that information is available, simple and understandable, but I am also keen to ensure that I can deliver what I am able to. Part of that is by taking this away and giving it further consideration.
Energy Bill
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Lord O'Neill of Clackmannan
I rise in defence of my noble friend—although we disagreed on the previous amendment. We are losing sight of what is a legitimate tactic in the process of scrutinising legislation. In order to have the Government justify what is in the Bill, we have to ask them to remove things for them to tell us why they should be in it in the first place. That is what my noble friend has sought to do in a variety of areas. No one is suggesting that the ONR will decline the invitation. It seems to be general public knowledge that one or two Middle Eastern states that are envisaging or engaged in the development of nuclear power have looked to the United Kingdom as an independent regulator separate from the supplier of the kit and the running of the kit which they anticipate having. In order for us to have a clear understanding of the powers and the responsibilities of the ONR, we have to use the rather brutal method of seeking to delete those powers from the Bill so that they can be better defined. I realise that I have spoken for about two minutes longer than I should have done, but we are making rather heavy weather of this and I hope that my noble friend’s amendments will be treated fairly, as the Minister always does.
Baroness Verma
I am extremely grateful that the noble Lord ended on his last note, because I consider everything extremely carefully, but I agree with my noble friends Lord Deben and Lord Jenkin that we must not be so restrictive on what the ONR could do to enhance its standing in the world. I would like to address the amendments of the noble Lord, Lord Whitty, as they are grouped, so that I can clarify for him the reason why we are taking the position that we are.
Amendment 40C would require that the ONR’s accounts are presented to the Secretary of State and laid before Parliament at the same time as the annual report. The noble Lord, Lord Whitty, asked whether the accounts would be made available. Accounts are already required to be audited and laid before Parliament under paragraph 21 of Schedule 7, and, in practice, the accounts and the annual report will be published together. I hope that that answers the noble Lord’s question on reporting and laying before Parliament.
Amendment 40D would remove the ONR’s powers to borrow. This is not an element of the Bill that it is intended that the ONR would use frequently, and it can be used only with the Secretary of State’s approval. It is certainly not a blank cheque, but there may be instances where the ONR’s work may require extra funding in the short term to achieve a long-term goal, and in this instance I believe that the ONR’s power to borrow money, with appropriate checks and balances, is suitable for an independent public body.
Amendment 40G, on the other hand, would seek to require the ONR to recover the full costs of an inquiry. Laudable though the intention is, we cannot always guarantee that full cost recovery will be appropriate. The costs of some inquiries may not be fully attributable to one or even a group of duty holders. We would not wish unfairly to add extra charges to business for costs not incurred by them.
I am grateful to the noble Lord for tabling Amendment 40K. It would remove provision in Clause 79 for the ONR, with Secretary of State approval, to provide services related to its expertise but not part of its purposes. My noble friend Lord Jenkin eloquently articulated how important the provision is, because of the specialist knowledge that ONR possesses, if resource were available, to, for example, assist another country with assessing the safety of a new reactor design. Under the Bill, ONR could charge for such work, including at a commercial rate. The provision of such advice would have real benefits—not just financially, but, as my noble friend said, by helping to spread the UK’s high standards of practice internationally and giving ONR inspectors wider experience.
Let me be clear: the ONR’s first priority will be to meet its obligations as the UK’s nuclear regulator. Nothing will allow us to detract from this. My noble friend Lord Deben is right; we must allow the ONR to get on with its core activities. To ensure that there are no actual or perceived conflicts of interests, any commercial work which the ONR undertakes will be only with the consent of the Secretary of State. For those reasons, I hope that the noble Lord will withdraw his amendment.
Nuclear Waste
Debate between Baroness Verma and Lord O'Neill of Clackmannan
Baroness Verma
My Lords, my right honourable friend the Secretary of State would have given my noble friend a date of 2120, not 2020. The cost of storing plutonium is commercially confidential, but my department has assessed the cost of long-term storage alongside other options, such as MOX. Based on a discounted lifetime of 100 years, the cost is around £8 billion. My noble friend asked about the report being laid before Parliament. Once we have received the report, I am sure we will consider that.
Lord O'Neill of Clackmannan
My Lords, the noble Baroness has just taken on responsibility for this area. Will she share with us her first impressions? Most people who have followed this issue know that for decades there has been muddle, confusion and delay which, more than anything else, is likely to prejudice the voluntarism of a number of communities in west Cumbria that recognise, perhaps more than anyone else, the economic importance of proper and orderly disposal. That is not an excuse for delay. Will she please try to make this process move a lot more quickly so that the uncertainty can be removed?
Baroness Verma
The noble Lord is right that I have been in the department for seven weeks. My first mission was to go to meet people from Cumbria and Sellafield. It is important that we get some clarity, but it is also right that this process is community-led. If there are clarifications that need to be made, it is right that they are made. We do not want delays further down the process, so it is best that we get clarifications and sort out people’s worries and concerns at the beginning.