Energy Bill [HL]

Lord Giddens Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord Giddens]

My Lords, it is almost Christmas and at this time of year one is supposed to be merry, so I thought I might start by telling a joke, at which I hope the Minister might at least be able to giggle. I was looking for a joke on oil and energy. They are not too easy to find, but I did discover one about the BP oil spill, which we discussed last week in your Lordships’ House. Scientists have developed a way of running a car on water. The only drawback is that the water has to come from the Gulf of Mexico. Well, I did my best.

I have been impressed by the breadth of welcome given to this Bill, although not from all quarters, of course. It ranges from environmental NGOs to the Committee on Climate Change to energy companies. The Bill builds on the framework laid down by the previous Government, and rightly so.

As I have stressed many times in your Lordships’ House, it is very important that there is cross-party consensus on climate change and energy policy. I have crossed swords with the noble Lord, Lord Lawson, on many occasions and I respect what he says. However, it is very important that there is not a polarisation between left and right on this framework of policy and therefore I am happy to support it. We saw with what happened in the United States how disastrous it is if there is a polarisation between left and right around climate change and energy policy.

Unlike the noble Lord, Lord Lawson, I congratulate the Minister, the noble Lord, Lord Marland, on the vigour and determination he has brought to this process. Not least important, the Treasury seems fully on board with the proposals incorporated in the Bill. This situation is reassuring because, again unlike the noble Lord, Lord Lawson, I think we are talking about revolution within the British economy and the broader global economy. The recent report of the Committee on Climate Change, again rightly, recommended that the power sector be virtually wholly decarbonised by 2030, which is a truly radical proposal.

No doubt criticisms can be directed at some aspects of the Green Deal—noble Lords have already done so—and improvements suggested. The Government are right to place a great deal of emphasis on it given the poor quality of the housing stock in the United Kingdom in terms of insulation and heat retention, to which other noble Lords have drawn attention. I am also pleased to see that we are getting closer to realising the Government’s stated intention to put a floor price on carbon, with a final decision to be taken, as I understand it, in the Budget in March. The new provisions for enhancing energy security are very welcome, as is the proposal to limit carbon emissions from existing coal-fired power stations by means of an emission performance standard.

I have three questions for the Minister; they do not concentrate solely on the Green Deal but on a number of issues surrounding it. First, have the Government given thought to the implications of Jevons paradox? This is very important. W Stanley Jevons, who was a famous economist, showed that greater energy efficiency leads to higher overall energy consumption; that you get a perverse outcome from increasing energy efficiency. He said:

“It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth”.

He deployed a large range of historical evidence to this effect but I shall offer the House a humble and more macroscopic example: when fridges became more efficient, people simply started buying larger fridges and used more energy than before. The most energy efficient country in the world is Japan, but it has a steeply climbing carbon emissions curve.

This is serious for the Bill because it means that the Government must place it in an analysis of the wider economy in terms of its knock-on consequences. I should like to know what thought the Government have given to this because otherwise, even though it sounds somewhat ugly, the Jevons paradox could undermine the whole thrust of what the Bill is supposed to achieve.

Secondly, job creation is often mentioned as an important outcome of investment in home insulation, renewable energy and wider energy innovation. However, there is an awful lot of loose talk around this, some of which appears in government documents, I am afraid. Where it is said, for example, that wind power will create so many thousand jobs, what is important is not the jobs that are created by specific technologies or innovations but, because jobs will be lost in the older energy industries, the net new jobs that are created. Have the Government done a calculation of net job outcomes from the innovations in the Bill and the wider innovations that are proposed? Without that, you cannot say that these innovations will create net new employment. Most new technologies tend to reduce the need for labour rather than expand it. This is an important aspect of investment in new energy technologies and I feel that a lot more work must be done on it than I have seen. As I said, many statements on this topic are simply superficial.

Thirdly, as outlined in the Bill, planning and the core role for the state are integral to the Government’s proposals. The noble Lord, Lord Lawson, called them “dirigiste” proposals, essentially as a way of dumping on them. I would say the opposite. I think that it is right and proper in energy and climate change, where you are planning for a 20-year or 30-year cycle, to have a plan. Planning is integral to this and the Government are right to say so, but why only here and not in other areas? This comes back to a point made by my noble friend Lord McFall. Energy is one area where there could be a renaissance of British manufacturing, as has been mentioned, but at the moment the situation is that, with most of the technologies involved, we will be dependent on foreign providers: the French for nuclear power, the Germans and the Danes for wind power and the Chinese for solar power. Why, then, do the Government not have an investment-led strategy for linking a renaissance of manufacture to the implications of the energy framework that they have introduced? Quite contrary to what the noble Lord, Lord Lawson, said, one needs an investment strategy with targeted regional planning if one is really going to use energy innovation as a means of helping to promote a renaissance in British manufacturing.

--- Later in debate ---

[Lord Marland]

The golden rule is that it generates energy efficiency. It is not intended, as I understand it, that boilers are part of that. Boilers were part of Warm Front, so there has been a lot of activity in that regard.

The noble Lord, Lord Grantchester, refers to deep geothermal, as do, unsurprisingly, the noble Lord, Lord Teverson, and others. We are exploring a licensing scheme as we speak. I hope to return to that subject in Committee. It is a very valuable and useful way forward.

The noble Lord, Lord Teverson, raised the issue of water. We will support the reduction of leaking, provided it can be demonstrated that it reduces the energy cost to the household. He mentioned issues relating to the accreditation framework, as did the noble Lord, Lord Grantchester. I think I dealt with several of those but the devil will be in the detail. With their permission, I hope we will go through that quite extensively in Committee.

The noble Baroness, Lady Finlay of Llandaff, offered the very good suggestion of an alarm system, which I will take away and consider as a valuable issue. I am grateful for her support on that.

My noble friend Lord Jenkin of Roding raised several points. First, who pays for the assessment? This is a market-led endeavour. We would expect a lot of it to fall within the promotional incentive of the people who are going to supply it. The most important thing is that the Government support those who are needy and cannot pay for it themselves. That will be done through an ECO or other function. I am glad my noble friend also mentioned EPCs because I have instigated a review of these. I would like to keep my powder dry until the review is finished. However, by the time we go through the Committee stage, we should have had the full review. I will give further details of that as it goes on. EPCs clearly need a great deal of looking at to make sure that they are fit for purpose. Who bears the cost of a consumer default? A consultation process on that is going on at the moment. It may live with the providers of the Green Deal or the energy companies themselves.

I agree with the noble Lord, Lord O’Neill, that we have not had a big initiative on gas storage due to factors I mentioned previously. To slightly embarrassingly blow my own trumpet, I signed the planning permission for a 15 per cent increase in the nation’s gas storage, which had been sitting around waiting for a new Government. We have taken keen action on that, which we need to increase, although it is not our primary concern because we have the most sophisticated terminals in the country for receiving gas. They are also the most flexible, so we can get gas from various supporting operations. Twenty per cent of our supply still comes from a Norwegian network and we still have a diminishing 50 per cent here in the UK.

The noble Lord, Lord McFall, posed the question of how Rupert Soames would like to be remembered. As he is a friend of mine, I feel he would like to be remembered as the CEO of a business that got into the FTSE 100 and generated great employment not only in Scotland but in England. In fine Churchillian tradition, he has achieved a great deal.

We seek to reform planning, which the noble Lord, Lord Hunt, referred to, by bringing more direct control—and therefore quicker decision-making—over such matters as onshore and offshore wind back into the ministerial department so that they can then be dealt with quickly and efficiently.

The noble Baroness, Lady Maddock, referred to HECA, which came from a Bill that she triumphantly took through the Commons in 1995, although she no doubt worked on it for some time before that. HECA was indeed a very good measure that served a great deal of purpose. However, time has moved on dramatically in this area and there has been much consultation on the subject. The consultation carried out in 2007 indicated that a change was very much on the cards. I am grateful for the support of the noble Baroness and for her advice on consulting various people, including ACE. I understand that ACE feels comfortable that our proposals will be a good follow-on to the great work that she carried out, for which we all owe her a great deal.

The noble Lord, Lord Giddens, fed me some interesting stuff. We all learnt about the Jevons paradox—apart from the noble Lord, Lord Lawson, who explained the point to me while sitting beside me, for which I am very grateful—which my officials tell me we take very seriously. However, as I had not heard of the paradox beforehand, noble Lords will not have expected me to know that. We build in a substantial discount for estimated energy savings from energy efficiency in all our impact assessments to account for increased consumption. Nevertheless, significant net savings still occur even with this conservative assumption.

Job creation, new jobs, net jobs and the renaissance of our manufacturing industry, which the noble Lord, Lord Giddens, and the noble Lord, Lord Hunt of Chesterton, raised, are absolutely fundamental. We believe that 100,000 new jobs will be created through the installation industry. That will appeal to the noble Lord, Lord Giddens, as an economist.

[Lord Giddens]

It is important to consider that one is talking about net new jobs. Just talking about creating jobs is not good enough, because the act of creating new jobs often destroys old ones. We must carry out an analysis of that.

[Lord Marland]

I totally agree. New jobs are created by new productivity. Clearly, there is a shortage in the building trade at the moment so I did not say that there would be 100,000 new net jobs. Obviously, if the building industry takes off at the same time as the home installation or Green Deal activity, new net jobs will be created.

However, net new jobs will be created by the £60 million of technological support that we are giving to the offshore wind industry. Four companies—GE, Siemens, Gamesa and Mitsubishi—have already agreed to sign up to a contract to start manufacturing in the UK, and we have been talking to others. That will create not only £300 million worth of new investment but new jobs.

The noble Baroness, Lady Parminter, talked about the need for an ombudsman, annual reports and targets. Those are very good points. It is important that we have an assessor for the accreditation scheme. I will take those very good points away and discuss them with officials.

The noble Baronesses, Lady Noakes and Lady Smith of Basildon, talked about the Bill’s timetable. I am no expert on timetables as I am a self-confessed virgin in taking Bills through the Lords, or any Parliament for that matter. It will not be possible to have 54 delegated powers draft SIs beforehand, but I shall be happy to explain the timetable and the powers that we are taking over the next few weeks. I am also happy to discuss the timetable with the noble Baroness, Lady Noakes, outside of that. We are committed to ongoing consultation on a lot of issues. In Committee there will be more detail about the consultation. We will consult formally on most of the SIs at the end of 2011 before introducing them in 2012. There will be a series of consultations and I am very happy to discuss the timetable of the Bill, and any additions to it, in the open way that we have addressed this so far.

I am grateful to the noble Lord, Lord Hunt of Chesterton, for his support for the Coal Authority changes. As we have discussed in camera, the Bill presents a very good opportunity for us all.

The noble Baroness, Lady Smith of Basildon, asked how the 2.5 million households in appalling conditions could apply for the Green Deal. I am grateful that she explained the pathway whereby the ECO would have been a good way of doing that. Between us, over the next few weeks we need to develop a clear pathway on how that will happen. She reasonably asked why demand for cavity wall insulation is falling. The fact of the matter is that, over the past few years, a lot of simpler cavity walls have been filled and demand is therefore reducing. However, we are now moving into the territory of complicated cavity walls. I am also extremely grateful for her suggestion, which she has made previously, about smart meters. Clearly, we must insist on an industry objective of sharing the same set of common standards. The noble Baroness is absolutely right on that, and we will have developed the specifications by the summer of next year.

The Chief Whip would like me to bring my speech to a conclusion, as would I. Therefore, I am very happy to write on other points made by noble Lords. However, I should like just to mention that boilers can be included in the Green Deal, provided only that the expected savings meet the golden rule.

I want to reiterate that the Bill will bring energy efficiency to homes and businesses across the UK. This is an important Bill and, as I said earlier, despite one intervention, I am grateful for the advice that I have received from all sides of the House. I will continue to benefit from that advice as we discuss the Bill and take it through the House of Lords. It is exciting that the Bill should start in this House. I look forward to continuing these discussions in Committee—in or outside the Moses Room.

I should also like to thank my officials, Hansard—whose staff are incredibly tolerant in these matters—all the staff and all noble Lords and noble Baronesses for their support. I wish you all a very happy Christmas and, indeed, a prosperous new year.

Bill read a second time and committed to a Grand Committee.

Motion to Adjourn