Electricity and Gas (Smart Meters Licensable Activity) Order 2012
Debate between Lord Marland and Lord Reay
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, by the end of 2019 every home in Great Britain will have a smart meter and an in-home display, empowering people to manage their energy consumption and reduce their carbon emissions. The rollout of smart meters will play an important role in Great Britain’s transition to a low-carbon economy and help us to meet the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is the largest changeover programme in the energy industry since the introduction of North Sea gas about 40 years ago. It will result in the installation of about 53 million meters in Great Britain, involving visits to some 30 million homes and businesses.
There would be little point in such an undertaking without it bringing very real and substantial benefits. Our impact assessments show estimated net benefits of about £7 billion over 20 years. Smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions. They will bring an end to estimated billing, and switching between suppliers will be smoother and faster.
The rollout of smart meters will be led by the energy suppliers, but the Government are playing an essential role to establish the necessary framework, of which the order is a fundamental part. The communications and data transfer and management required to support smart metering are to be organised by a single new central communications body, referred to as the Data and Communications Company. The DCC will be an entity regulated under licence by Ofgem. The intention is to re-compete this licence periodically to put downward pressure on costs.
The DCC will provide a service of remotely communicating with smart meters on behalf of electricity and gas suppliers, electricity distribution companies, gas transporters and third parties authorised by the consumer. It will also provide services to other third parties authorised by the consumer, such as energy services companies, helping to open up that market. The DCC will play a key role in supporting a competitive supply market by delivering a single system that will support easier switching between suppliers. The DCC will not operate these services itself but will contract with data and communications companies for their provision. These contracts will, again, be re-competed periodically. This model delivers the necessary security and interoperability required for the smart meter system. Security is critical, given what the DCC will do, and achieving interoperability ensures that consumers are able to switch energy supplier without the need for additional costly meter changes. This model is strongly supported by the industry.
The order introduces a new activity into the lists of those requiring licences under the Electricity Act 1989 and the Gas Act 1986. It will be unlawful to undertake this activity without holding a licence. The activity is inserted into each Act, but the provisions make it clear that the holder of a licence under one must be the holder under the other. There will be one active licensee at any one time and its licence will be granted for 12 years. A competitive process will be used for granting the licences and an order to set out the process will be made once the order that we are considering today has been made. We have consulted on a draft of the licence, which is available on the department’s website.
We have described the licensable activity in the order as something that only the DCC will be doing—that is, making arrangements with domestic suppliers to provide a communications service for smart meters. This is defined as narrowly as possible to limit the potential for other persons to be caught in its scope. However, in the period before the DCC is established and able to offer services, other persons will be active in the market to support early smart meter installations. We want to support this as part of the foundation of the smart metering programme, which will provide important information and learning for the mass rollout. We have therefore included a transitional exemption, lasting for 36 months from the date the order comes into force. This allows time for the DCC to become established and supports the foundation stage.
To conclude, the Government have consulted on the broad approach to the regulation of the DCC and in detail on the licensable activity for the DCC set out in the order. Our stakeholders support the approach that we are taking. I beg to move.
Lord Reay
My Lords, according to the information in a footnote on page 23 of the impact assessment, only 0.5% of households today have smart meters. From this tiny base, the coalition has committed itself to a rollout to 100% of domestic households by 2019, as the Minister explained—an enormous undertaking.
One of the purposes of this policy seems to be to reduce demand. On page 9 of the impact assessment, the Government include in the list of objectives for the policy,
“facilitating demand-side management which will help reduce security of supply risks”.
It is presumed that customers will be enabled, and will choose, to reduce their consumption of gas and electricity when they discover how much each appliance they use contributes to their total bill. At the same time, suppliers will learn and be able to observe much more about their customers’ usage of gas and electricity. Will this make it easier for them to control supply—for example, to ration it selectively in the event of electricity shortages? As far as I can see, the Government do not discuss this in the impact assessment. They have no interest in drawing attention to the possibility of future shortages of electricity, even though—perhaps because—some of us think that this is the likely consequence of their energy policy.
The impact assessment represents the cost of the rollout as being in the region of £10 billion. Many meters that have a long and useful life ahead of them—so-called stranded assets—will be replaced. These costs will presumably be added to consumers’ bills. I do not know whether the Government have estimated how much they will add to the bills of individual customers, both domestic and industrial.
The Explanatory Memorandum describes the new body to which my noble friend referred. It will be regulated by Ofgem and established as the Data and Communications Company. Although described as a company, I imagine that it is classified as a quango. Perhaps the Minister will confirm that.
Electricity and Gas (Energy Company Obligation) Order 2012
Debate between Lord Marland and Lord Reay
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, there is no rest for the wicked. Judgment has been passed.
One of my department’s key priorities is reducing carbon emissions by tackling energy-inefficient buildings which are needlessly—
Energy: Feed-in Tariffs
Debate between Lord Marland and Lord Reay
Lord Marland
I am very grateful to my noble friend. The fact is that if we did not act now, there would be nothing in the pot for those schemes to which she is referring because it would be empty by March for the next spending review period. We have taken this action to allow community schemes, among others, to carry on. This is not retroactive. If you are in the scheme already, you are still benefiting from it. It is new regulation that we are bring in. I hope that gives her a degree of comfort. I am, of course, happy to explore it during the consultation process and, as always, I am delighted to hear my noble friend’s views.
Lord Reay
My Lords, I welcome the Statement, which I hope will be one of a series aiming to reduce the subsidies available for renewable energy, as the Government seek to limit their cost to the consumer and to the economy.
The Written Statement issued today in the name of Mr Gregory Barker stated:
“Over 100,000 homes now generate their own electricity”.
Will the Minister say whether he meant all their own electricity or just some of it, perhaps including those who generate only a very small part of their own electricity? Will he give any figures to indicate how much electricity is being generated or has been generated to date by solar PV, and how much do the Government hope or expect will be generated in the future?
Lord Marland
I will have to write to my noble friend on the latter question. The answer to the first question is as in the Statement—that over 100,000 homes now generate their own electricity.
Electricity Market Reform
Debate between Lord Marland and Lord Reay(13 years, 5 months ago)
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Lord Marland
As ever, the noble Lord, Lord Jenkin, knows the subject. I am slightly disappointed that he does not believe that there is a nuclear framework. We announced that there are to be six new nuclear power stations and reaffirmed that announcement two weeks ago and the sites where they will be located. Realistically, there are a number of issues in terms of the balance sheets of some of the companies wanting to invest—as we have seen from the fall-out in Germany. Having spoken with EDF, Iberdrola and others this week, I know that they are very committed to the cause of the nuclear framework.
As to when the legislation will happen, we are obviously hoping that it will start at the end of this year. There are some timing issues, even with getting the first Energy Bill back to this House—as we all know. The legislation issue will be difficult because there is a certain logjam in the other place.
On who will operate and regulate the supply, this will largely be Ofgem, which will have greater teeth. As we are running a little bit out of time, I am happy to discuss at a later time with the noble Lord the various component parts of that rather than going into it now—if he is happy for me to do so.
Lord Marland
Naturally, we work very closely with the devolved Governments. We are all travelling down the same path. However, HM Treasury, rather than the Scottish Government, will be responsible for the renewable heat incentive funding. That is in the spirit of the union, I think.
Lord Reay
My Lords, this extremely important White Paper sets out to introduce the reforms, if one can call them that, which the Government consider are necessary if they are to meet their targets for extremely high-cost, heavily subsidised renewable energy. I hope we will get the chance to debate it.
I have just one question for now. The Statement mentions offshore wind on three occasions but makes no mention of onshore wind. Can we take it that the Government are lowering their sights with regard to onshore wind and, it is to be hoped, abandoning their targets altogether? It is a deeply unpopular form of renewable energy, it bitterly divides local communities and it is destroying some of our finest countryside.
Lord Marland
I do not think my noble friend can take that from our Statement. The reality is that onshore wind does divide communities—my noble friend puts his finger on it—and it therefore becomes an issue for local communities to decide through the local planning process whether they want it. A large number of local communities in Scotland are embracing onshore wind whereas a number of communities in this country—I am sure my noble friend Lord Reay’s community is one of them—do not want to embrace it. The reality is that the Government have a target. Two-thirds of that target for onshore wind is either met or is in the process of being met so there is a very limited amount of headroom. Our real push is to get offshore wind up to the target we wish to achieve.
Carbon Budget Order 2011
Debate between Lord Marland and Lord Reay
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, I beg to move that the Carbon Budget Order 2011, for the fourth carbon budget level, laid before the House on 24 May, and the Climate Change Act 2008 (Credit Limit) Order 2011, for the second budget period credit limit, laid before the House on 7 June, be approved.
I suggest that the two statutory instruments on the Order Paper in my name be considered together. Both instruments have been laid in accordance with the Climate Change Act which puts the UK at the forefront of the challenge to reduce emissions and the move to a low-carbon economy. The first order relates to the requirement to set the level of the fourth carbon budget. The five-yearly carbon budgets provide an effective framework for monitoring and delivering emissions reductions required to achieve our 2020 and 2050 targets. The second order sets the limit on the net amount of international carbon offset units that may be credited to the net UK carbon account for the second budget covering the period 2013 to 2017. I thank both the Joint Committee on Statutory Instruments and the Merits Committee for carefully considering the two orders before us. The Joint Committee on Statutory Instruments cleared these instruments without comment. The Merits Committee drew the special attention of the House to the draft order setting the fourth carbon budget on the grounds that it gives rise to issues of public policy likely to be of interest to the House.
I begin by introducing the first order, relating to the fourth carbon budget. This is the total permissible level of the net UK carbon account for the period 2023-27. The Act requires that this is set by 30 June 2011. The level in the Carbon Budget Order 2011 is expressed in units of million tonnes of carbon dioxide equivalent, the standard for measuring greenhouse gas quantities. It amounts to a 50 per cent reduction on 1990 emissions in the 2023-27 period. The proposed level of the fourth carbon budget, of 1,950 million tonnes of carbon dioxide equivalent over the period, ensures that the UK is on an optimum pathway to comply with the 2050 target of at least an 80 per cent reduction in greenhouse gas emissions. In proposing the level, the Government have taken into account, and agreed with, the advice of the Committee on Climate Change, published in December 2010. The Government aim to meet the proposed fourth carbon budget figure of 1,950 million through reducing emissions domestically as far as practical and affordable. But given the high number of factors that can affect emissions we also intend to keep open the option of carbon trading to retain flexibility. This is a pragmatic approach when considering the uncertainty involved in looking so far ahead.
I draw your attention to the Government’s policy statement that I announced on the Floor of this House on 17 May, where I referred to a review of this carbon budget in 2014. Let me explain our reasoning behind this. The level of emissions reductions we achieve in the power and heavy industry sectors is dependent on the level of ambition in the EU ETS, which sets a cap on emissions for these sectors. Meeting the proposed fourth carbon budget would require a tightening of the EU ETS cap from its current trajectory. It is therefore right that we come back to this issue in a few years’ time to assess progress at the EU level in moving to more ambitious targets. If at that point our domestic commitments place us on a different emissions trajectory than that of the Emissions Trading System agreed by the EU, we will, as appropriate, revise our budget to align it with the actual EU trajectory, pending advice from the Committee on Climate Change and taking into account the views of the devolved Administrations. In the mean time we will continue to push as strongly as possible for greater ambition at the EU level. This brings me on to the second instrument we are debating today, the Climate Change Act 2008 (Credit Limit) Order 2011.
The Act requires there to be a limit set on the net amount of carbon credits that can be used for each budget period. This order sets the limit for the second budget period, covering the period 2013 to 2017, at 55 million tonnes of carbon dioxide equivalent in total. This must be set by 30 June 2011. Use of these credits would only apply to the non-traded sector; in other words, those sectors not covered by the EU Emissions Trading System. This proposed limit is consistent with the flexibility mechanism under the EU legislation covering the non-traded sector from 2013, which allows for limited use of international credits to help meet annual reduction targets set under the EU Effort Sharing Decision. There are already limits on the use of credits by participants in the EU Emissions Trading System through the EU ETS, which guarantees that at least 50 per cent of the emissions reductions between 2008 and 2020 will take place in Europe. Let me make it clear that we already have a robust policy framework in place to meet the first three legislated carbon budgets, and emissions projections show that we expect to meet these domestically without recourse to the purchasing of credits. In proposing the 55 million tonnes limit, the Government are just choosing not to rule it out at this stage; this is simply a contingency. I commend these orders to the House.
Lord Reay
My Lords, these orders are required under what I view as the Climate Change Act 2008. The Carbon Budget Order sets the limit for our permissible CO2 emissions for the fourth carbon budget as much as 12 to 16 years away, and the credit limit order states the proportion of our second carbon budget, from two to seven years away, that may be met by the use of so-called carbon credits, whereby we pay people in developing countries to do the emission reduction while we carry on doing the emitting.
The Explanatory Memorandum for the fourth carbon budget order has its usual quota of manifestly untrue assertions, including that on page 1:
“there is an overwhelming scientific consensus that it”—
that is, climate change—
“is being caused by human activity”.
There is certainly no consensus. On page 19 there is the statement:
“The scientific evidence for recent global warming continues to strengthen year on year”.
In fact there has been no global warming for the last 10 years, so even with an elastic definition of the word “recent”, that sentence makes no sense.
The order prescribes what the United Kingdom’s CO2 emissions for the five years from 2013 to 2018 are to be on the way to achieving an 80 per cent reduction by 2050, over 1990 levels. The report of the Merits of Statutory Instruments Committee draws attention to the fact that the chances of the United Kingdom staying within that budget will depend on the degree of take-up of the Green Deal, and on early investment in carbon capture and storage. In fact it is quite likely that the public will find the Green Deal unattractively expensive, and where take-up does occur, it may well result not in CO2 emissions savings, but in people choosing to live in warmer homes. CCS is a rash punt by the Government on a scientific breakthrough that will enable it to be rolled out to scale economically. Meanwhile, of course, China rolls out a new coal-fired power station every week, quite uninhibited by any need to wait for carbon capture and storage to be oven-ready. The Merits Committee adds that,
“a key development will be the package of measures to help the energy-intensive industries adjust to the low carbon industrial transformation while remaining competitive”.
This refers to the further contortions that the Government have to make in response to protests from the industry concerned in order to try to offset the effects on them of the carbon tax which the Government propose to introduce. So complicated is that process that the Government want to have until the end of the year to try to work out what to do.
The greatest chance of the Government being able to meet their distant carbon emission targets, including the 80 per cent target in 2050, ironically depends on the failure of the economy to revive. The Climate Change Act, and the policies adopted as a consequence, are doing their very best to bring that about. The Government must sometimes wonder, when by themselves, whether this outcome will please the general public when it becomes apparent and whether this pleasure might ever express itself in the ballot box.
The credit limit order relates to the second carbon budget starting in two years’ time. The Government state in the Explanatory Memorandum that they expect the budget to be met comfortably by territorial emission reduction; that is to say, by emissions calculated to have been reduced on United Kingdom soil and that, therefore, there is likely to be no need to purchase ICUs—international carbon units. The provision in the order is therefore, as my noble friend the Minister said, purely a contingency.
The Government seem almost wistful about this, regretting this missed opportunity to give support to another foreign aid scheme. On page 6 of the Explanatory Memorandum, they state: “This option”—referring to one of the policy options, policy option 1, which is not the one in effect adopted—
“could signal an increased commitment by the UK government to purchase emissions reductions from developing countries, which would form part of the overall demand signal to the private sector to help drive investment in new projects overseas”.
In fact, the system just introduces new scams and corruption opportunities to developing countries, as if enough were not provided already by our aid budget.
It is not that the opportunities seem confined to developing countries. It was reported in the press that the legislature in Australia was giving consideration to awarding carbon credits for the funding of the extermination of Australia's 1 million-odd feral camels on the grounds that they were substantial emitters of methane gas and no doubt were a noxious pest in many a constituency in the Outback.
Our Government state, sadly, that they are strongly supportive of the international carbon credit system, notwithstanding the similarity that it seems to bear to the pre-Reformation church, when indulgencies could be bought from Rome to permit sinning at home with a clear conscience. Kyoto is the new Vatican.
The Climate Change Act should be repealed, its panoply of carbon budgets abandoned, all the agencies such as the climate change committee which drips its advice into the Government's ear sent packing, and a chance given to our economy to resurrect itself. Otherwise we have a grim and, very likely, a dim future.
Energy: Shale Gas
Debate between Lord Marland and Lord Reay
Lord Marland
My Lords, it is abundant and cheap in America, where a great amount of it has been found—three times the supply, in fact. However, we have different problems here in the UK. We have a high population density and are unsure of the reserves. There are all the planning issues that go with high population density. Therefore, it will not necessarily at this point mean a huge surge in the gas supply in this country. However, the point that my noble friend makes about taxation and the carbon floor price will be taken into account with this technology.
Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010
Debate between Lord Marland and Lord Reay
Lord Marland
The answer is that they may or they may not. There is no fixed method by which to use the commercial levers that are available to them, as you would expect. I hope that that answers my noble friend’s question.
My coalition friend, the noble Lord, Lord Teverson, rightly mentioned that he has changed his place and now has to look at a new picture. I agree that it is nice to see a different prospect and I do not have to work out whose foot that is, lying there wearing the sandal; hopefully, the intelligence of the noble Lords, Lord Hunt of Kings Heath and Lord Woolmer, will work that out for us. I certainly know who wears the trousers in our household, but I have never worked out who wears the sandals.
He mentioned the counterintuitive nature of the current CERT arrangement. I agree with him that it is counterintuitive; again, the green deal—sorry to bang on—should help to cope with some of that counterintuitivity.
The noble Lord asked what the uplifts are, compared with existing targets. The pro rata extension of the reduction of 108 million lifetime tonnes of carbon dioxide represents a 3 per cent reduction of household emissions from the non-traded sector in 2013. I hope that that deals with his question.
The noble Lord, Lord Woolmer, dealt with what the noble Lord, Lord Hunt, calls “enveloping”. I was wryly pleased that he asked that question; it was the first question that I asked our officials when this was brought to my attention. The answer is that it is the best way of coping with this, and it is the most cost-effective way for the supplier to deal with small groups in certain areas. We should encourage this. I take on board fully what the noble Lord said, but I am amused that we should have thought of the same thing together. I am grateful to him.
The noble Lord, Lord Hunt, whose baton I am merely picking up on this issue—I am glad I did not get as hard a time as I might otherwise have done—went on about cost. With all due respect to him and to others, there are more than 11 pages in the document outlining the costs. I know that the breakdown is complicated and split into various measures, but I commend it to noble Lords because it is comprehensive, and I am grateful to my noble friend Lord Taylor for talking me through it.