Energy: Efficiency

Lord Teverson Excerpts

Monday 10th December 2012 Lords Chamber

Asked By

[Lord Teverson]

To ask Her Majesty’s Government how they intend to implement their strategy for energy efficiency.

[Lord Teverson]

My Lords, I thank the group of noble Lords who are joining in on this debate. I thank them for their dedication towards the important subject of energy efficiency. It is quite appropriate today, perhaps, that E.ON, the last of the big six, has just announced its energy price rises for dual-fuel customers of some 8.7%. This means that we have had energy price increases over the last few weeks of between 6% and 11%, which is not insubstantial when we have household average earnings going up by 1% or 2%.

As a nation and as households, we tend to tackle problems and think about them more when the bill arrives on the doormat, whether it is the electricity bill or the gas bill. The nation’s example would be the impending £100 billion to £200 billion invoice that will arrive for new energy infrastructure over the next decade—depending on whether you include generation alone, or all the other areas of networks and the national grid and all of that side as well. At that point, you think you must make changes in the way that you live and you have to save on that expenditure. That is why energy efficiency and the efficient use of energy are core areas on which, as a nation, we must make sure that we concentrate.

Indeed, we have had a number of recent successes or moves forward by the Government. We have had the publication of the electricity market reform Bill, which may provide us with opportunities for demand reductions in future. We will see how that progresses through Parliament. The Energy Efficiency Deployment Office was set up in the last year, which I welcome very much. We have had the consultation on demand reduction at the end of November. We have also had a government energy efficiency strategy, which is what caused me to call for this debate. The sad thing was that, rather predictably, that strategy was not really noticed or commented on by the press or the wider community. I suppose that, in comparison with gas fracking, wind turbines supposedly blotting the landscape, the stops and starts of new nuclear or maybe even the occasional arguments between the Treasury and DECC, an energy efficiency strategy is not seen as particularly interesting news. I very much differ over that, and I will explain exactly why.

The most important thing is that there are a number of benefits from such a strategy and from energy efficiency. First, and perhaps most importantly from a human point of view, is that of fuel poverty. Clearly, if we have an energy-efficient household stock and economy, fuel poverty will go down. At the moment there are 3.5 million households in fuel poverty. Cold winter deaths are thought to be somewhere in excess of 25,000, costing the NHS £1.3 billion—but, far more importantly, there is the human cost of those deaths to those individuals and to their families.

Energy efficiency means that emissions come down and there is greater energy security. It also means, according to the Secretary of State, that we will need 22 fewer power stations in our investment programme by 2030. It could also mean that we do not have the cost of winter fuel payments that at the moment cost the Exchequer £130 million each year in subsidising people’s fuel bills, when what we really want is for them not to have to pay those prices anyway. Of course, the other big benefit of energy efficiency is that we actually reduce the energy bills not just of households but of British industry as well, making it more competitive.

Therefore, we currently have a number of initiatives, most of which I welcome. The Green Deal operates from 28 January 2013, and with that we have the open home networks. Regrettably, we have had a gap between the Green Deal starting and CERT ending, and some strain put on the industry and the house refurbishment sector over that time. We have the energy company obligation coming in. Today we announced simplification of the carbon reduction commitment, which I very much welcome. I hope that soon it will recognise renewable energy usage as well. We have the smart meters roll-out programme starting in 2014 and the enhanced capital allowance for business.

Despite having that collection of measures, what we have is seen by industry in particular and households to a degree, as a lack of clarity about the future landscape. Business has certainly not been aware of all those incentives. Although we have a carbon plan, I believe that for the first time we have a proper and important strategy for the future in this area.

I have always been pretty critical of the United Kingdom’s energy performance as regards the houses and factory units that we built in the 1960s and 1970s. However, going through the figures, I have to admit that over the past 20 years or so, under Governments of different colours, we have not done too badly. In fact, total UK energy usage has been flat since 1970. Since 1980, energy intensity—that is, the amount of energy we use per unit of GDP—has gone down 52%. That fall has been quicker over that period than that of the United States, Germany, Japan or France. We are one of the lowest of the major developed nations in terms of energy intensity. Of course, one of the reasons for that is that we have given up producing most things and we have a service-based industry. The financial services industry does not create much at all, according to some people, but it certainly does not create a lot of carbon emissions or have high energy usage.

However, since 1980, although energy usage as a whole has stayed the same, electricity usage has gone up by 60%. Even with present policies, another 10% rise is expected by 2030 and that could go up to 15% when we move to electric vehicles and a switch in space heating from oil and gas to electricity. However, the prize is great: some 150 terawatt hours of savings could be captured by 2030 according to at least relatively independent reports. Given that in 2010 total usage was 328 terawatt hours, that is a saving of 45% of current consumption. However, the risk that has been identified is that 92 terawatt hours of that will not be achieved, which is a quarter of the expected 2030 electricity consumption. That is why the concentration on energy efficiency for electricity in particular is so important. In December 2001, the Government’s carbon plan said that if we are to cut our greenhouse gas emissions by 80% by 2050:

“Energy efficiency will have to increase dramatically across all sectors”.

However, it is not just a matter of electricity usage. I have a particular concern about the zero carbon homes programme to be implemented for new homes from 2016 and for new industrial premises from 2019. Those two are a core area. The energy efficiency strategy identifies four barriers, including an underdeveloped market for energy efficiency. That market has grown but is still underdeveloped, particularly in comparison with the United States. There is also a lack of trusted and appropriate information. I hope that having smart meters in households will start to put that right. Further barriers are misaligned financial incentives, although the Green Deal is trying to do something about that, and undervaluing energy efficiency generally.

I have several questions for my noble friend the Minister. How will the Government start to overcome those barriers? That is not fully outlined in the strategy but perhaps that is still to come and the work is still to be done over this current year. Smart meters are the way to engage the public much more broadly. I would be interested to hear from the Minister where the Government are in terms of getting public engagement. Will there be a system like the TV digital switchover that was so successful? How will we get the demand side incorporated in the Energy Bill that is starting to go through Parliament? How will we integrate the European energy efficiency directive that is to come into force in 2014 into our own strategy? Can the Minister assure me that there will be no more watering down of the zero carbon buildings?

One billion pounds are being put forward for carbon capture and storage and £100 billion of investment in power generation is expected. Given that we have a housing stock of 26 million homes, that £100 billion of investment could be used in spending £4,000 on each home to cut demand in the first place. There is a great prize to be won. It is not just a case of win-win; in this case it is win again and again and again. I commend the Government’s recent work on their energy strategy and ask them to deliver it.