Lord Deben
Main Page: Lord Deben (Conservative - Life peer)
Lord Roper
My Lords, I made a brief reference to voltage optimisation earlier in the Grand Committee’s proceedings. I referred to the very useful lunch organised by the noble Baroness, Lady Worthington, where a number of us were able to learn from members of the trade association what was being done. In the rather steep learning curve on the topic of energy that I have experienced over the last 12 months, that was one of the high points, given that not only has the UK been a pioneer with this technology, but it is very effective, both at the level of the large consumer and, in other ways, at that of social housing.
I will make one suggestion to the Minister, if I may. We discussed earlier the situation laid down in Clause 37 of a pilot scheme or schemes for electricity demand reduction and the possibility of the Government setting up or examining pilot schemes to see what could be done. It seems to me that voltage optimisation is one of the areas that could come under what we have already considered in Clause 37. I would be interested to know whether the Minister feels that there is any chance of considering it within that framework.
Lord Deben
My Lords, I am sorry not to have been able to be here earlier. I declare an interest, given that in the past I have assisted firms of this kind to try to get a wider application of their equipment. There are certain drawbacks with this, but what I find so interesting is that it is a particularly British problem. It is simply because we have gone along with a voltage that is out of line with that of other people. Given that everybody manufactures to a voltage that is common elsewhere, we have something that is less than optimal. That is all. If the system is less than optimal we waste significant amounts of energy and our equipment works less sensibly and wears out more quickly.
I do not to repeat what the Committee is perfectly well aware of but simply to say that this is another example of how much can be done in very simple and small ways, which all add up. One of the things that worries me about governments of all kinds—this is not a comment about the present or the previous Government—is that small things that add up do not get the same attention as big things that very often do not add up at all. There seems to be a kind of desire to do things people will take note of, rather than understand how much there is which, if we add it up, makes a huge difference.
I do not want to go over it all, but I am sure that there has been a significant saving of energy simply because kettles now show you how much water has been put in, so that you know what you need for a cup of tea and do not put in too much. All those simple mechanisms actually make a difference. The trouble is that people tend to laugh at them, because in themselves each one does not matter. If we had voltage optimisation as a built-in feature of every new home, for example, and if it was automatically offered in every circumstance, we would save a significant amount of energy.
I therefore hope my noble friend will be able to say that her department will concentrate on the small things that add up but which will not get headlines in the Guardian. That is the fact. Let us see if we can do some of that because it would certainly make a big difference to meeting our energy demands.
Baroness Verma
My Lords, I am grateful to the noble Baroness, Lady Worthington, for the amendment. Over the past few months, a number of questions on voltage optimisation have been raised in this House and the other place. This is the result of having an industry that is passionate about its product and its estimates of potential savings. The Government, however, have to look at this objectively and consider the evidence of performance. I am not sure whether my noble friend Lord Deben was here during our previous debate but it demonstrated that the Government look at smaller projects. Perhaps my noble friend would look at Hansard to see how we are already supporting some smaller projects.
Voltage optimisation is a piece of electrical technology that could potentially reduce the energy consumption of household appliances and industrial machinery by lowering the supply voltage. Manufacturers of voltage optimisation devices have asked for recognition of this potential to save energy through its adoption in government-sponsored schemes, including the Green Deal, which the noble Baroness, Lady Worthington, mentioned. The Green Deal is an example of how a government strategy has been introduced that encourages householders and businesses to invest in technology, as long as it has a measurable and verifiable energy saving and can be recommended for a given building. These criteria are important to ensure that we realise real energy savings and ensure good value for money to consumers.
There is an established process for admitting new technology into the Green Deal, which entails the industry submitting its evidence to the Government’s contractor for entry to the standard assessment procedure, which is the tool for determining the energy efficiency of domestic buildings. In the case of voltage optimisation, this evidence has been reviewed by BRE, and its report has confirmed that there was a saving from the installation of voltage optimisation in some of the properties tested. In all these instances, however, part of this saving was found to result from a reduction in the level of service provided to householders—for example, by making lights dimmer. This cannot be counted as a real energy efficiency saving.
The report also highlighted further reductions in the estimated savings from voltage optimisation arising from the impact that EU directives are having on the energy efficiency of household appliances. The effect is that appliances are becoming more tolerant to, and efficient at, working within a range of supply voltages. A realistic projection of the likely take-up of modern appliances reveals that the potential saving from voltage optimisation will reduce each year, such that by 2020 the saving is likely to reduce to zero in a typical home and then become negative in later years. This is due to the voltage optimisation unit’s own power consumption.
In the commercial sector, it is more difficult to make generalisations about the efficacy of voltage optimisation due to the wide range of electrical plant that could be in use. However, this sector, too, is subject to improvements in the energy efficiency of electrical plant due to EU directives, which will reduce the savings from voltage optimisation. It is against this backdrop of evidence that the Government cannot commit to supporting voltage optimisation. There already exists a strategy within the Green Deal that allows industry to get its technology recognised and adopted, subject to it meeting key criteria. If the evidence for voltage optimisation were to change, then we could reconsider whether the market forces found within the Green Deal were sufficient to encourage its uptake.
I should also like to touch on the scale of savings that the noble Baroness believes will be made with voltage optimisation. We found that the indicative costs and savings were as follows: voltage optimisation units could cost around £300 plus the cost of installation but may save, on average, only £2 per annum. It has been suggested that by 2020 the units will use more energy than they save and will therefore have to be removed at further cost. This is evidence provided by the industry to the BRE, and the organisation Which? agrees with DECC about this. Given that, I hope that the noble Baroness is reassured that we are taking every possible opportunity to look at new entrants, and that on that basis she will withdraw her amendment.
Lord Whitty
My Lords, we really are at the end now. I shall try to be brief but make no apology about turning to a subject that affects the deliverability and credibility of the entire Bill. When we had a discussion on the establishment of an expert committee, the Minister referred me to the clause to which this amendment applies. Clause 139(2)(c) provides for resources to be raised for the employment of advice. I have no objection to that, but ad hoc advice, as we said the other day, is not sufficient for delivering such a complex project. We are now horribly aware of that, having been through nine days in Committee. Apart from a few serious experts in DECC and possibly Ofgem, a few very sharp lawyers sitting in the big six and other interested parties that may be on the other side of these deals, we probably know as much as is likely to be known at this stage about the nature and process of the contracts, the difference in the process of investment contracts and to a lesser extent, given that a lot still is fairly obscure, about capacity mechanisms.
The public know nothing, the potential participants know nothing and consumers know nothing. DECC, the counterparty and Ofgem will face a complex process. They will have to deal with extraordinarily complicated and novel arrangements that do not reproduce anything extant anywhere in the rest of the world when it comes to electricity supply. They will be dealing with companies who are very sophisticated, who employ the very best advice and who, necessarily and rightly, are looking for a deal which will profit them as well as helping the long-term future of our energy security.
Delivering what is in the Bill, even though it is not that thick a Bill, will be an extremely complex process. Parliament and the public would expect departments and others representing the Government and the public in this process to have very solid advice. Some of that can be dealt with on an ad hoc basis, contract by contract and aspect by aspect. However, as was made clear in a previous debate, you need an institutionalised body which is clearly publicly known and respected, consisting of people with deep experience of the legal, financial, technological and economic issues which it is tackling. Above all, you need consistency. You need corporate memory and a body to oversee the individual officials and Ministers who, whether we like it or not, are not there for ever. They are often there only for a few months or years and cannot take full responsibility for negotiating these contracts.
The expert panel is an advisory panel, but it is an important strengthening of the whole process. I do not expect the Minister to change her mind today, but unless the Government recognise that they need something like this—they may want to call it something else—the deliverability of this whole process, on which so much depends, will look extremely shaky. I therefore hope that the Government will at least take on board that they ought to look at this concept again. I beg to move.
Lord Deben
My Lords, I very much oppose the amendment, which seems unnecessary. A great deal of advice is available and it is not necessary to have yet another committee. A committee has been proposed with a different role, which seems to me to have a much more sensible and wider view. That was in an earlier amendment—which has been withdrawn but which I have no doubt will come back—proposed by the former chairman of Shell UK, the noble Lord, Lord Oxburgh. That seems to be a much better proposal than this one. It is not necessary to shove this in at this point. The Secretary of State will have at his behest a whole range of people on whose advice he can rely. This gives him permission to do that, and although I am all in favour of giving him that permission, I do not want him to have yet another committee. I think that this is the wrong way to do it and I very much hope that my noble friend will resist the amendment. I rather suspect that she will, and it is always a pleasure to end such an afternoon, now almost evening, by entirely supporting my noble friend.
Baroness Verma
I am extremely grateful to my noble friend. I thank the noble Lord, Lord Whitty, for his amendment, which would set up an expert panel to advise the Secretary of State on the exercise of his powers relating to CFDs, investment contracts and capacity payments. I reassure the noble Lord that we are working hard to ensure that the process through which final contracts for difference and strike prices are set is transparent, robust and informed by a full range of expert input. The consultation on the draft delivery plan, as well as workshops and events with stakeholders, will allow industry, consumer groups and all other stakeholders to scrutinise the figures, and the evidence used to develop them, and provide us with feedback to inform the final plan.
Prior to the consultation, the draft strike prices were also informed by two pieces of independent advice: the analysis provided by National Grid, which helped the Secretary of State understand the potential impacts that different strike prices could have on the Government’s objectives and, of course, the independent scrutiny of that analysis by the panel of technical experts. Both these reports were published alongside the draft EMR delivery plan and copies have been deposited in the Libraries of both Houses. The panel of technical experts in particular, which consists of experts in relevant areas such as economics and generation costs, was appointed through an open competition. It is impartial and independent of any particular viewpoints. I do not therefore think that we need to create another expert advisory panel. We have used existing powers to appoint the current interim panel of technical experts and, following Royal Assent, we intend to establish an ad hoc advisory group. Clause 139(2)(c) provides the spending authorisation to support this work.