Electricity and Gas (Energy Company Obligation) Order 2012

Lord Reay Excerpts

Monday 23rd July 2012 Grand Committee

[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—

[Lord Reay]

On a point of order, is the Minister now going to deal with the next four items of Business all together?

--- Later in debate ---

[Lord Dixon-Smith]

My Lords, I am very grateful to the Minister for describing together the four orders we have before us. It saves me the trouble of trying to do so, and I would probably make a mess of it. I should say—perhaps we all ought to say this when we speak on this order—that I have a house that is pretty energy-inefficient so, in a sense, it could be argued that I have an interest in the outcome of this debate, but it is not a direct interest of the sort that is normally declarable.

I have a particular interest in speaking on the first two orders on the Minister’s list—the energy company obligations order and the Green Deal (Qualifying Energy Improvements) Order. I should say that I have had a letter from the Glass and Glazing Federation that has steered my remarks. It has a particular concern, which I shall come to. To put this into context, we need to recognise that 23% of all heat lost from buildings goes out through the windows. It is perhaps much more significant that 85% of all houses have windows that are less than grade C quality, which is the medium on the quality scale where grade A is ideal and C is the medium. The reason that the glaziers have been in touch with me is that they have particular concern about double glazing and a part of the energy company obligation. Double glazing is not specifically mentioned in the list of qualifying improvements. That may just be a peccadillo. Replacement glazing and secondary glazing are mentioned. To the extent that double glazing could be replacement glazing, I presume that it is included. I have no doubt that the Minister will tell me that that is so.

Much more important is the issue raised in the Electricity and Gas (Energy Company Obligation) Order where the conditions under which the improvements can be undertaken are set out in Clauses 15, 16, 17 and 18. What has concerned the glaziers is Article 16(5), which says specifically:

“Where a qualifying action or adjoining installation is a glazing measure, a supplier must only calculate the carbon or cost saving which exceeds the saving which that measure would achieve if installed to the minimum standard required by, as applicable, Approved Document L1B”,

and so on. One wonders why glazing is mentioned specifically. Everything else on this comprehensive list, which is very welcome, is okay, but glazing is specifically mentioned. The effect of this in its past interpretation, and it may be that the department is going to place a different interpretation on it, has been that energy-efficient improvements will be counted only from the C rating up, even if a householder changes from a poor single-glazed window to an A-rated double-glazed window. In other words, this is going to hit the 86% of houses that have the lowest-grade windows because their improvement will not count until it reaches grade C, if this wording is correct and if I am correctly informed, and I am quite prepared to admit that I may well be misinformed. If that is the case, this is a significant matter for the glazing industry and indeed for the principle of what we are trying to achieve with the Green Deal. We are going to disadvantage a lot of the less well off households because that is where the vast majority of poor-quality windows will exist.

Will the Minister agree at least to look at this issue? I do not expect him to be able to say that there is an instant answer that he can give me today. In fact, today we are approving these orders because we can do no other, so there is nothing we can do about this issue, which I rather regret; it would have been nice if I had known about it three months ago. We need to think seriously about this issue. According to the Glass and Glazing Federation, it looks as if there is a bit of a chink in the order and it would be better if that did not exist.

[Lord Reay]

My Lords, the Green Deal seems to be a ferociously complicated and expensive bureaucratic edifice. It has the laudable objective of improving the energy efficiency of existing British homes and other buildings without requiring the taxpayer to fund it. If I understand the impact assessment correctly, the cost of the energy company obligation will be recouped by suppliers from customers’ bills generally, so that is a further cost to the consumer. As for the amount, I saw different references—a reference to a cost of £1.3 billion a year on page 187 of the impact assessment, but a reference to £540 million a year in the letter from the Minister that appears at the back of the report of the Secondary Legislation Scrutiny Committee. I do not know if the Minister might be able to comment on those figures.

The take-up of the scheme is of course unknowable. Much will depend, as the Government point out on page 131 of the impact assessment, on the trust that people learn to put into the scheme. Plenty of things could go wrong to affect or even destroy confidence and trust.

Two of the advantages of the scheme are said to be the saving of the CO₂ emissions as a result of less electricity being used, and greater thermal comfort for householders through enabling them, for the same cost, to enjoy high temperatures in the homes. However, each of those objectives is achievable only at the expense of the other.

I will refer to some interesting paragraphs on page 89 on the subject of health. The impact assessment correctly points out that the scope for improving health by alleviating cold living conditions is considerable. However, it goes on to point to the growing concern that the removal of ventilation can increase the incidence of disease. It expects more attention to be focused on this subject in future.

Finally, I will ask the Minister a question on the subject of external cladding. We read recently that another government Minister had declared that he wished to promote this form of energy efficiency. Will my noble friend give an assurance that this will not be done to listed buildings? We do not want beautiful buildings and streets being vandalised into eyesores in the name of energy efficiency. Enough damage is already being done to the countryside by wind turbines, as the Minister well knows.

[Lord Whitty]

My Lords, I have a number of points; I will try to restrict them to five. The first two follow up on what my noble friend Lady Worthington referred to as “joining up the dots”. The first is very straightforward and relates to the previous item. I do not understand, even at this late stage, why the Government’s programmes for smart meters and the Green Deal are not allied at least in their means of delivery and timing. Householders will be faced with two different initiatives, one compulsory and one voluntary, at the same time. They could easily be combined. I will leave it at that.

My second and most important point concerns how the ECO mechanism and the Green Deal mechanism join up, in particular in relation to tackling fuel poverty. I think that the Minister was being a little economic with the truth earlier when he claimed that this represented an increase in the number of the fuel poor who would benefit from government policy. Figures produced by my former organisation, Consumer Focus, indicate that the total spend on fuel poverty will fall from £1.1 billion to £540 million in 2013. The latter amount will be accounted for largely by the proportion of the ECO that will be geared to addressing fuel poverty.

As the noble Lord, Lord Reay, said, all consumers will pay for the ECO. It is more or less a poll tax and therefore regressive on those who cannot afford to pay. The offset will be geared through measures such as the warm homes discount, and will include the gearing of some aspects of the Green Deal to the fuel poor. It is not clear that the fuel poor will benefit, in particular those who are tenants either of private or social landlords. Because of turnover and the nature of the tenants, it is unlikely that many will sign up to the Green Deal. Therefore, it would be much more efficient to deliver it via the landlord. Questions of inherited obligations would begin to disappear, and so forth.

It is not clear that in net terms the Green Deal can be delivered easily to individual households in tenanted property. It is not clear how obligations such as the forward payment could be delivered, and it is not clear how the relationship between the landlord and tenant could facilitate the take-up of the Green Deal—the payback from which will take a number of years. My central problem is that a significant element of those who are in fuel poverty will be unconvinced, if they are in their own property, of the need to take up the Green Deal. If they are in tenanted property, they will be unable on an individual basis to take up the most cost-effective ways of achieving Green Deal benefits.