Energy Company Obligation
Debate between Alan Whitehead and Lord Barker of Battle(10 years, 9 months ago)
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The Minister of State, Department of Energy and Climate Change (Gregory Barker)
It is a pleasure, Ms Dorries, to serve under your chairmanship today. I congratulate the hon. Member for Nottingham South (Lilian Greenwood) on securing this debate and creating an opportunity to discuss our policy on driving home energy efficiency in some of the most difficult to treat properties and some of our poorest and most vulnerable households. She and I may not always agree on the best mode of delivery, but I admire her tenacity on this issue.
I want to reiterate the point that I made in my earlier intervention. I am not in a position to offer guarantees or to spell out details today, but I had a positive conversation with the chief executive of Nottingham city council yesterday. I am pleased with the constructive way that they worked with my officials at the Department of Energy and Climate Change following the meetings that the hon. Lady helped to facilitate. The council is looking more positively at the green deal and working to submit a bid under the green deal for communities, and I look forward to announcing the result of those bids. I am glad to say that there has been a strong response from more than 80 local authorities. We have already announced the first tranche of street-by-street roll-out of the green deal and it is receiving a positive response.
I want to make a general point. The thorough retrofit of Britain’s housing stock is a challenge and is not easy. The hon. Member for Nottingham South and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who speaks from Labour’s Front Bench, are absolutely right. I am absolutely committed to the street-by-street roll-out. It is the engine for delivering whole-home retrofit in the most cost-effective way, but I am afraid that that was totally absent from the points raised by the Opposition. I commend them on their concern for the fuel-poor and the will to improve the housing stock of their constituents, but it is at best misinformed and at worst disingenuous to pretend that there is some bottomless pit of money when they represent the party that left us with the biggest peacetime deficit in our country’s history and brought us to the edge of financial ruin. What is more, during the last Parliament they drove up the number of fuel-poor people, which peaked in 2009—the last year of the Labour Government —at 5.5 million. Since then, on any measure, that number has fallen under the coalition Government and, according to the latest figures, it now stands at around 4.5 million.
It is wrong to suggest that energy efficiency is a universal panacea. I am a huge advocate of energy efficiency, but it is delivered at a cost, and it is not fair to deliver policy ambition on the backs of the fuel-poor. ECO is funded by consumers—every single customer. It is not funded by general taxation, and to some degree it is, like the CERT and carbon capture and storage programmes, which Labour introduced, regressive because it falls on the fuel-poor as much as the wealthy. It is unfair to disregard the cost of those programmes.
The coalition Government have acted clearly to reduce the cost of Labour’s levies on fuel bills to help to lighten the load of the fuel-poor and hard-pressed consumers. We removed from bills the cost of the £1 billion CCS programme, which the Leader of the Opposition introduced when he was Secretary of State for Energy and Climate Change, and now fund it more fairly and equitably from general taxation. We removed from domestic bills the cost of the renewable heat incentive, the final part of the domestic scheme, which will be launched in the spring, to the tune of hundreds of millions of pounds. Likewise, we responded to the escalating cost of ECO.
The Opposition must make a choice. Are they in favour of the £50 reduction in energy bills, or are they not? They owe it to their constituents and voters to make it very clear whether they will put those costs back on to energy bills. Are they saying that they would restore the ECO measures and in so doing drive up bills by at least £50 instead of freezing them? There are hard choices to make. Of course, we all want retrofit of the housing stock. I think we could all agree on the desirable measures, but they come at a cost and we must be fair to everyone and talk about how they will be funded.
It is true that it seems inequitable or unfair to cut the cost of ECO, which means that some people will wait longer for improvements to be installed, but bills will fall for millions of people. The improvements we are talking about will be installed in the homes of a few thousand people. We must be realistic. Progress was made under the last Labour Government, but they left millions of homes requiring substantial intervention to bring them up to what we would all regard as 21st century standards.
Dr Whitehead
Does the Minister accept that ECO is a carbon-saving obligation in the first instance, the funding of which follows? It would have been possible, even if the overall funding envelope had been kept as it was, to make changes in the carbon obligation in such a way that these programmes might have been saved. That is an entirely different point from the one he is making about whether one should abjure savings on energy bills as a result of trying to keep costs up overall.
Gregory Barker
I think we are talking slightly at cross purposes. Let me correct the idea that the ECO target has been obliterated, killed or put to bed, as anyone who listens to the Opposition could be forgiven for believing. The fact is that ECO has not reduced certainty; it has increased it. Labour’s CERT programme was year on year. It ran for 12 months, and was then extended for another 12 months. It was a hand-to-mouth programme. ECO now offers unprecedented transparency and long-term certainty for the insulation industry because we have extended it and guaranteed it up to 2017.
We have not simply stretched the target from 2015 to 2017. From 2013 to March 2015—27 months—we expect to deliver a saving through the scheme of around 14 megatonnes of carbon. In the period April 2015 to March 2017, to which we have extended the scheme, an additional 12.4 megatonnes will be saved, a cumulative total of 26.4 megatonnes, not 14 megatonnes. It is wrong to say that we have not extended ECO or that we are not offering long-term certainty against which companies in the supply chain can invest and set their business model.
We have given a clear message to companies in the supply chain that we cannot simply install the measures regardless of cost. We cannot reach our ambition to install solid-wall insulation at current prices, which is why we are trying to create a competitive market and to introduce new private sources of finance. We are trying to introduce greater competition and innovation to drive down the cost of the measures.
Although it is very early days for the green deal and ECO market, we are seeing real pressure on costs, not from the big energy companies but from the disruptive new entrants—the small and medium-sized enterprises, family business and entrepreneurs that are coming into the market. We should celebrate the fact that prices for solid-wall insulation are coming down. I have seen companies that are not only bringing down the cost of these measures but increasing the quality of the product, and the quality and choice of the offer to consumers. [Interruption.] The fact is that I have seen a lot of solid-wall insulation where what people end up with is homes that look like they have been airlifted from East Germany. The people who do it take out all the character and just put on some uniform fascia. In fact, what people increasingly want is choice. They do not want to see character obliterated from their home. They want to see improvements. I am glad to see that we are getting that sort of innovation into the scheme.
I understand where the Opposition are coming from in their desire to retrofit homes. I understand their ambition to improve the efficiency, warmth and comfort of homes, but unless they can cost that out and be honest with the electorate about how much it will cost and how much of the burden will fall on the fuel-poor and on hard-working families, they are just a pressure group; they are not worthy of being considered the Government. We are making those choices and laying out the whole picture for the electorate. We have to balance the costs to hard-working families with the benefits to the few that will receive ECO.
Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle(10 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
I pay tribute to my hon. Friend’s long-standing interest in campaigning for renewable energy. Let me assure him that there is a great deal of meat in the community energy strategy. We are establishing a £10 million urban community energy fund, providing seed funding for a one-stop-shop information resource, launching a £100,000 community energy saving competition, and setting up an industry-led taskforce to achieve greater shared ownership of onshore renewables. Altogether, it is a bold vision with a plan for delivery.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister will be aware that a number of community-based combined heat and power schemes that were proceeding exactly on the basis set out in the strategy paper he mentioned have now collapsed thanks to the changes in the energy company obligation that his Department announced recently. Does he intend to take steps to use the resources he has mentioned, as set out in the community energy strategy, to help retrieve those schemes? If not, what message does he think will be sent on the future of the community energy strategy as a whole?
Gregory Barker
We certainly want to see more CHP, and we now have a dedicated resource in the Department supporting it. This comes back to the point I made earlier. Labour Members have to decide: are they going to stand up for endless subsidy or support us in driving down the cost of consumer bills? They cannot have it both ways.
Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
Let me reassure my hon. Friend, who is a very effective local champion for entrepreneurs such as Mr Chester and for those struggling with high energy bills in Pendle. I assure him that the coalition has a long-term plan to slash fuel poverty. As we have extended the ECO out to 2017 and increased the number of people it will help, Green World Energy Solutions and other firms like it can now plan with real certainty to continue to improve the homes of thousands of families and help them to cut their bills.
Dr Alan Whitehead (Southampton, Test) (Lab)
12. What progress he has made in developing renewables obligation grace periods for renewable energy developers able to demonstrate financial closure of projects prior to March 2017 but commencing operations after that date.
Energy Bill
Debate between Alan Whitehead and Lord Barker of Battle
Gregory Barker
I have been following the argument closely. Although we are not in a position to announce details today, our thinking is very much in tune with that of the hon. Gentleman, and we recognise the issues that he raises. We expect the capacity market to run in 2014, but we expect that, separate from that, piloted projects for energy demand reduction will be funded to help scale up the market, and in future we expect ring-fenced auctions, at least for a transitional period, for specific demand response and demand reduction projects.
Dr Whitehead
I thank the Minister for that clarification. I am encouraged by the thinking that clearly is beginning to be done on what these things might look like. I wish the Minister luck when the Treasury realises that the pilots taking place on capacity payments may have more substance to them than the Treasury might think. I should not have said that, in case someone there reads the Hansard transcript of this debate! I am encouraged by the Minister’s response.
The other matter that I want to raise relates to amendment 47, which calls for the establishment of a green power auction market arrangement in wholesale and retail sales of energy. I want to spend a moment establishing why something like GPAM is so important. My amendment attempts to resolve, or at least to go some way to resolving, a very serious issue: the drying-up of opportunities for independent generators to establish reliable markets for their low-carbon generation once the renewables obligation comes to an end in the spring of 2017.
Hitherto, those independent generators have been able to secure power purchase agreements on the back of renewables obligation certificates, and to use those agreements effectively to bank their investments, so that they have the sort of market certainty that enables those investments to be funded because it is known that there is a stream of sale coming forward that will ensure that the investment is made and works well, as far as both the independent generator and the bank are concerned. With the arrival of contracts for difference, that simply will not be the case. Indeed, power purchase agreements for those people still undertaking RO arrangements before the end of the renewables obligation have already dwindled to virtually zero. In fact, only one company, as far as I know, is presently providing power purchase agreements.
Most independent generators, whether we are talking about onshore, offshore, or other forms of low-carbon generation, are already thinking, when it comes to their investment decisions, about CFDs rather than ROs, simply because of the time period over which those investments have to be considered. They cannot go back to the bank and say, “Can we have that investment on the basis of what we can demonstrate to you, in the absence of other financial credit lines, is a known supply line for our energy product?”
The outcome could be quite perverse, with regard to what the Bill’s intentions have always been. It was always the intention, with the contracts for difference, to try to bring a lot of new, different investment into the energy market, as well as independent generators of different sizes. It was also the intention to ensure that the vertical integration seen in recent years did not become the enemy of investment, or of small, independent operators and others trying to get into the market, but rather became its friend, as other entrants came into the market alongside larger generators.
If the outcome is that as a result of the Bill we further consolidate the vertical integration of the market rather than the opposite, that will be a perverse outcome relative to everything that the Bill was supposed to bring about. If we can get a mechanism similar to the green power auction market—if it quacks a bit like GPAM and walks a bit like GPAM—I would be happy with that. We need some mechanism that can ensure that independent generators are not captured by the very large companies and that they do not have to enter into such disadvantageous contracts that they will fail to make a living from the energy that they are trying to put into the market in the future.
UN Framework Convention on Climate Change
Debate between Alan Whitehead and Lord Barker of Battle(11 years, 8 months ago)
Westminster HallRead Full debate Read Hansard Text
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Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
I thank my hon. Friend for his dogged determination in pursuit of this issue. I assure him that, although we cannot yet declare victory, we have victory within our grasp. Thanks to the leadership of the Prime Minister and our determination to legislate, we are moving towards bills that not only offer greater transparency and clarity, but instil greater competition. I think that our final model will be based on the modelling that my hon. Friend has shared with us.
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Secretary of State explain why he proposes in the Energy Bill to include contracts for difference that are raised from levies in the levy control mechanism, but to exclude capacity payments that are raised by levies from the same mechanism?
Feed-in Tariffs
Debate between Alan Whitehead and Lord Barker of Battle(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
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Gregory Barker
A couple of weeks ago, the Department launched a new project to help communities build local energy schemes and programmes, and many communities across the country have responded very positively to it. They will be ideally placed to help inform, encourage and drive forward local programmes. We take the issue of communities very seriously, which is why we are consulting on a new community tariff. We are also considering introducing a community tariff guarantee to make it easier for communities to plan ahead, recognising that it sometimes takes them a little longer to get their plans in place.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Minister intend to increase the proportion of the levy cap that is provided for FITs up to the end of the spending round in 2015? If so, how much will he increase it to—and why could he not do this before the recent fiasco?
Gregory Barker
We will substantially increase the DECC resources that are made available for this scheme. We are happy to do that now because this new scheme offers much better value for money than the scheme we inherited. We expect that about £1.3 billion will be made available for this scheme over the spending period, but there will not be any increase in the cost to consumers, and the total sums will still be within the overall levy control framework. This will be achieved through better budgetary management by DECC, and our conviction that the new scheme offers better value for money than the one we inherited from Labour.
Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle
Gregory Barker
My hon. Friend makes some excellent points. Sustainably sourced biofuels for electricity, including bioliquids, are already supported under the renewables obligation, but they are not currently supported by the feed-in tariffs. We will launch phase 2 of the feed-in tariff comprehensive review, which will consider their potential expansion to new technologies such as bioliquids. I certainly take his points on board.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the Minister consider that the renewable heat incentive makes sufficient provision for the encouragement of domestic and small-scale combined heat and power boilers, which are particularly appropriate to off-grid households but may not be fully covered by the provisions of the RHI because they are not necessarily supplied by fully biogas-based sources? Is he willing to investigate that and consider whether the RHI could support such devices to a better extent?
Gregory Barker
I am very willing to do so indeed. The RHI has not been launched in full for domestic appliances—we are currently trialling it with the RHPP—but I am keen to support micro-CHP in the way that the hon. Gentleman suggests. He is an expert on this area and I would be happy to work with him to see what further support we need to drive forward this exciting technology.
Solar Power (Feed-in Tariff)
Debate between Alan Whitehead and Lord Barker of Battle(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
I believe in the huge potential of solar. Like my hon. Friend the Member for Sherwood (Mr Spencer), who made an excellent speech, I believe it is a terrific technology. It is intuitive, dynamic, attractive to consumers and easy to install, and I am determined to see it at the heart of the coalition’s ambitious plans to bring decentralised energy to millions of Britain’s homes, communities and businesses. What is more, unlike the right hon. Member for Don Valley (Caroline Flint), I campaigned for it, voted for it and genuinely believe in it.
However, for those of us who are passionately committed to the green agenda, there are two great threats in these difficult economic times. First, and obviously, there are the climate change deniers, but secondly, and I think even more dangerously at the moment, there are the deficit deniers. There is no greater bunch of deficit-denying opportunists than Opposition Front Benchers, who seem to think that the green economy lives in a vacuum, immune to the economic realities confronting every other sector of the British economy and to the impact that that has on consumer bills.
The fact is that Labour was wrong to vote against feed-in tariffs in November 2008. It was also wrong to introduce them in April 2010 without any budgetary control mechanism at all, and wrong to ignore lessons from the successful FITs model in Germany. It was wrong to ignore totally the potentially huge impact that FITs could have on the fuel-poor in particular, and catastrophically wrong earlier this year when it insisted that our early review of large-scale feed-in tariffs would butcher the entire UK solar industry. In fact, following that statement by the Labour Front Benchers, the deployment of solar technology has risen by more than 300%, and it has risen more than tenfold since the beginning of the year. The statistics are staggering.
No wonder Which? has stated:
“It’s right that the Government properly controls spending on Feed-in Tariffs as everyone pays for this scheme through their energy bills.”
No wonder the chief executive of Consumer Focus has said:
“The Government is taking a sensible approach to protect energy bill-payers with the proposed changes to Feed-in Tariffs. Incentives to overcome the high set-up cost of solar panels and help make our energy supply greener are necessary. But the cost for this is passed onto bills of energy customers and we need to strike a balance.”
That is exactly what we need to do—strike a sensible balance between our high ambition for decentralised energy and recognising the costs of what is still the most expensive to support of the whole array of decentralised technologies.
Unfortunately, Opposition Front Benchers bury their heads in the sand. The notion that spending billions on solar would cost no more than £1 on people’s bills is from cloud cuckoo land. They clearly have not yet got up to speed with their brief. They will know from the impact assessment that we published in September that the central estimate is that it would add £28 to bills every year by 2020. Since then the estimate has risen again, and the higher estimate is £55. We now know, given the level of deployment in October, that if we did not act now it would add up to £80 to everybody’s electricity bills.
Tell that to the 5.5 million people whom Labour left in fuel poverty. Let us not dwell on the fact that Labour cannot add up and are a bunch of deficit deniers. We know that because of the state they left the economy in.
Some very sensible comments have been made in this debate, and I am very grateful to all colleagues.
Dr Whitehead
On the impact assessment that the Minister himself carried out, does he accept that the £26 is relevant only if the tariff at its present level continues until 2015, which was never the scheme’s intention in the first place, on anybody’s reckoning? Will he withdraw that suggestion and replace it with what is the case in the impact assessment? [Interruption.]
Feed-in Tariffs
Debate between Alan Whitehead and Lord Barker of BattleUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
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Gregory Barker
Absolutely. We must get away from the silo culture that concentrates exclusively on solar PV, on the technological flavour of the month, or on one or two types of intervention. We need an holistic approach to energy measures, the most important of which is energy efficiency and the least important the generation of electricity. The right hierarchy consists of energy efficiency, then heat, then renewable electricity, and local authorities are key partners in that regard.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister said at the solar photovoltaics conference last Friday that he had not come to kill solar PV tariffs. Does he accept that these appalling policy lurches—two in the past three months—are killing the solar industry’s future, as was reflected by all those present at that conference? Will he now review the time scale for the most recent lurch, and at the very least extend it so that those who currently have contracts up to when there was originally going to be a review can carry out that work? Otherwise, no one will ever believe anything that he says about any tariffs in the future.
Gregory Barker
I am afraid the Labour party’s credibility on this issue is ripped to shreds. It said in the spring that the industry would be butchered, since when deployments per month have trebled.
Energy Bill [Lords]
Debate between Alan Whitehead and Lord Barker of Battle(13 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
That is a very important point. I do not rule it out completely. It is unnecessary to do so at this stage. But we do not anticipate that it will be necessary, and it is certainly not part of our planning and budgeting. Rather than the green investment bank subsidising interest rates at the consumer end of the journey, it is more likely that it will play a role in helping to pump-prime the liquidity in the bond market when we first see companies taking these aggregated packages of green deal finance and seeking to offer them into the bond market as new securitised products. In the long term, there is an exciting future, and there will be a lot of strong institutional demand for such products.
The conversations that we have had with the largest city institutions and banks have been encouraging and we have set up a working group. Short-term interventions to aid initial liquidity are more likely to be a fruitful use of green investment bank money. Although the coalition Government have promised £3 billion, substantially more than anyone anticipated at the general election, to fund this new important piece of financial architecture in the City of London, which will make a substantial difference to our economy and drive green growth, that money can be spent only once. The key to the green investment bank priorities must be to address market failure. We cannot keep spending that money time after time. There are many demands on the green investment bank funding, and if the market, as we believe, is capable of supplying competitive interest rates in a way that is affordable to most consumers, supported by the ECO subsidy, it would be quite wrong to use green investment bank money when we clearly need to prioritise other areas of the low-carbon economy as well.
Likewise, as the hon. Lady can imagine, DECC is pushing for an ambitious ECO. This is a huge opportunity that is extremely cost-effective, and in terms of the hierarchy of spend on the low-carbon transition, the ECO represents incredibly good value, particularly compared with forms of low-carbon generation; but, again, the ECO comes out of consumers’ bills, and there is a balance to be struck. We cannot keep pushing up the ECO, because ultimately that will start to become regressive. When the coalition came into government, we took steps to reduce consumers’ bills by taking off the cost of funding the CCS programme and taking it into general taxation. We took measures to ensure that the renewable heat programme would be funded not through consumers’ bills but out of general taxation, and that is a progressive measure. We have to ensure that we get the right balance and have an ECO that is good for consumers and does the job. We cannot treat it as a magic pot of money. It is paid by every energy bill payer, and more than ever, as world energy prices go up, they are scrutinising bills to ensure that they are getting good value for money.
Dr Whitehead
When the Minister says that he is pushing for a generous ECO, does he mean that he is pushing the Treasury to raise the cap that it has set on levies; that he is trying to ensure that the ECO is as generous as possible within the cap; that the ECO should remain outside the cap and therefore can be as large as he might wish to make it; or that the cap overall ought not to be referred further to the Office for National Statistics for a determination on whether the ECO is inside it at all?
Gregory Barker
All those issues are the subject of a constructive and thoughtful conversation between my Department and the Treasury.
Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle
Gregory Barker
Sadly, we know that in the past Warm Front has not been effective. Let us face it, more than 90 Members from all sides of the House, including Labour Front Benchers, have written to me to complain about it. Were we to carry on relying on Warm Front alone, it would take more than 80 years to treat homes which, under the green deal, we expect to treat by 2030. I have to say to the hon. Lady that there is funding next year, the year after and the year after that for Warm Front, but the real driver for eliminating fuel poverty will be the green deal and the ECO that underpins it.
Dr Alan Whitehead (Southampton, Test) (Lab)
What action does the Minister propose to take to ensure that the energy company obligation does not put more people into fuel poverty, as a result of the effect that the imposition of the levy will have on their bills, than it takes out? Will he consider rising block tariffs as a method of imposing levies, rather than an imposition on standing charges, which would have a particular effect on those in fuel poverty?
Gregory Barker
The hon. Gentleman speaks with great authority on this subject and is recognised as an expert, but we have considered block tariffs and do not believe that they are effective. The warm home discount is available, however, which will be worth more than £1 billion to the fuel-poor over the spending period. We expect it to help up to 2 million households a year. His point about levies is well made, and we have paid particular attention to that issue. That is why, unlike under the Labour proposals, the RHI will be funded out of general taxation, which we believe will be more progressive.
Energy Bill [Lords]
Debate between Alan Whitehead and Lord Barker of Battle
Dr Alan Whitehead (Southampton, Test) (Lab)
I am pleased to follow the hon. Member for Richmond Park (Zac Goldsmith), who has made a thoughtful contribution to the debate. He has underlined a number of the issues that I want to raise in connection with the Bill and the green deal. It is extremely important that the green deal should work well, so it must be as good as it possibly can be when the Bill completes its passage through Parliament. That is important because of the ambition that we must have for energy efficiency, whether through “negawatt” arrangements or other forms of energy management and energy saving. We must have the best and most energy-efficient housing stock that we can bring about. That is an essential part of our climate change action, and our action on energy management and the achievement of the CO2 emissions targets set out by the Committee on Climate Change.
Achieving that will involve an ambitious programme, and as a mechanism, the green deal is certainly ambitious. Indeed, the Minister himself said last summer that by 2050, as a result of the green deal, houses would not have to be visited more than once to assess their energy efficiency. That is the kind of ambition that we need for the green deal; we need to make it work as well as it can. My worry is that as matters stand, many things are missing from that ambition. That is what we need to concentrate on in Committee, so that when the Bill is enacted, the import of the 50-odd pieces of secondary legislation that have yet to be written, let alone enacted, will be much clearer. We shall also need to ensure that that secondary legislation provides the mechanisms to make the green deal work well.
I was pleased to hear this afternoon that among other things, the Government are not now intending to proceed with clause 105, which at the moment proposes the repeal of the Home Energy Conservation Act 1995 in its entirety. I would welcome an intervention from the Minister to confirm that that entire clause will now disappear and not go forward into Committee or beyond. Is that right?
Gregory Barker
I cannot comment on the detail, but I can assure the hon. Gentleman, as I assured the right hon. Member for Oldham West and Royton (Mr Meacher) earlier, that we have looked at this matter in the round. Having listened to a number of experts in the field, we think that we can breathe new life into HECA. It effectively became redundant under the previous Government, but we think that it could be revitalised and become an effective tool that could allow us to avoid imposing new regulation on local government.
Dr Whitehead
I thank the Minister for that clarification.
When we are talking about energy efficiency in homes, we need to understand just how big the task ahead of us is. The SAP—standard assessment procedure—rating of UK homes went up considerably under the last Labour Government. To be precise, the average SAP rating, which measures the energy efficiency of homes, went up by 11 points between 1996 and 2010—from an average of 42 up to 53. Over the last five years, the SAP rate increase went up one a half times as fast as in the previous five years and the five years before that. That shows how measures such as Warm Front and CERT—carbon emissions reduction target—which are going to disappear when the green deal comes in, were having some success in ensuring that homes were more energy-efficient.
In order to get anywhere near the sort of targets that hon. Members have suggested that the Government should consider introducing in an amendment to align energy efficiency with climate change targets—which I hope will happen in Committee—we need to move the SAP ratings much further up over the next few years, perhaps to 70 or more on average at band C by the end of the decade. That means making progress getting on for twice as fast as we have over the last few years. That is the sort of ambition that the Bill needs to encompass. My concern—hon. Members have already mentioned a number of concerns—is that it remains unclear whether that ambition can be achieved under the current mechanism, despite the claims for the efficacy of the green deal.
Oral Answers to Questions
Debate between Alan Whitehead and Lord Barker of Battle(13 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
My hon. Friend makes some excellent points. We will endeavour to ensure that we are very fair in the review, and we certainly want to sustain investment in renewables in schools, hospitals and other community projects that fall above the 40 kW review level. We also need to ensure that we get value for money for consumers and that we do not offer what Labour did—an open cheque book approach to the industry.[Official Report, 1 March 2011, Vol. 524, c. 1MC.]
Dr Alan Whitehead (Southampton, Test) (Lab)
When the Secretary of State made his announcement about the feed-in tariff review on Monday, he included in it the fact that anything over 50 kW would be regarded as large photovoltaic solar, but everybody knows that anything marginally above 50 kW is not large. The effect of the review will be to eliminate a large number of schools, hospitals and other facilities from the feed-in tariff. Does the Minister accept that a mistake has been made in that calibration, and is he prepared to go back and reconsider the number to ensure that the right figure is put in place?
Gregory Barker
I think the hon. Gentleman is unduly concerned. The 50 kW level simply refers to the current legislative definition of microgeneration. It is not our intention to place draconian limits on those above 50 kW, particularly in relation to the school and hospital schemes that he mentions. However, there is a real problem with large solar fields, and that is our primary focus. Going for 50 kW allows us to settle the matter discreetly, quickly and before the summer recess.
Energy Efficiency
Debate between Alan Whitehead and Lord Barker of Battle(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
Gregory Barker
Yes indeed. I think I mentioned pensioners in my speech and I can give the hon. Lady that assurance.
Dr Alan Whitehead (Southampton, Test) (Lab)
Does the hon. Gentleman intend to provide any additional facilities for ensuring that the extra categories that he has mentioned that will be a part of CERT can be identified by those energy companies that are required to identify them to and take action, or is the 15% target that he has suggested an approximation based on what the energy companies actually do?
Gregory Barker
The hon. Gentleman will know that data sharing is a very difficult issue, to which there is no easy ready answer. I do not underestimate it—any attempt to focus in such a way is in some way problematic, given the sometimes limited tools that we have and the restrictions on sharing data. We are considering that project in the Department, because we realise that data sharing poses real challenges. All I can tell the hon. Gentleman is that we will use our best endeavours and, if he has interesting and innovative ideas on how we can make it effective, we will try to frame them in the regulations that we will table before the House rises. I fully take his point on board; data sharing to ensure that we target the most vulnerable is a challenge.
Gregory Barker
I am happy to reassure the hon. Gentleman that no such guarantee is involved or required. I have had extensive meetings not only with the chief executives of energy companies, but with very senior members of the banking community, active participants in the capital markets and retailers such as Marks and Spencer, B&Q, which has been extremely supportive, and others, including installers. Across the industry—in financing, instalment and retail—there is universal acceptance of this model and there will be innovation in the capital markets. Some companies will choose to take the charge on to their balance sheets, but others will choose to participate in partnership with a financing company. I think there will be a real appetite among UK institutions—this is the game-changing element—to purchase what will in effect be a form of bond with a 25-year life. I think they will be securitised together and parcelled up, and will then make attractive investments for UK pension funds, which currently suffer from a relatively limited choice of secure, long-term investments from which to fund their annuities. I can guarantee for the hon. Gentleman that, just as the green deal is not a personal loan, mortgage or charge, nor will it sit on the Government balance sheet or require a Government guarantee.
Dr Whitehead
To make sure that the customer makes a net profit out of green deal investment, the Minister will presumably have to categorise what will be admissible for green deal insulations. If he categorises any form of microgeneration as admissible, as increasingly it is under Warm Front, he will have to make those calculations in the green deal programme in respect of any incentives that might be given for the use of that heat, in particular for insulation such as solar-thermal. Has he therefore excluded microgeneration from the green deal programme? If so, does that mean that the net amount per household that he would imagine being used with the green deal is much lower than the £6,500 suggested prior to the election?
Gregory Barker
It has never been the intention for the green deal to encompass, in its purest form, microgeneration, for which there is the separate support mechanism of feed-in tariffs. We will look closely at those tariffs to ensure that they are appropriate. We want to drive a far greater sense of ambition around microgeneration than was anticipated in the Energy Act 2010, which was passed in the previous Parliament. We are keen and ambitious for microgeneration, but I do not want it to be confused with the green deal, which is about energy efficiency, so it will not be included in that. However, we hope that providers that insulate homes under the financing of the green deal will, as I have outlined, take that opportunity to offer packages for appropriate microgeneration that also might not require any up-front payment because they are supported by a feed-in tariff.
It is important to stress the priority of energy efficiency over microgeneration, because there is no real point in adding microgeneration systems to energy-inefficient homes, but there is a great deal of sense in adding them at the same time as increasing energy efficiency. Of course, that would also require a smart meter. I hope that this package of measures will be available under the green deal umbrella, but the green deal financing we have been discussing and the £6,500 are for energy-efficiency measures. There is nothing magic about the £6,500 figure, but we had to come up with a figure and there has to be a cut-off point. We reached the figure with the help of BRE, but we might consider increasing it when proposed legislation comes before the House if that proves sensible. However, £6,500 is what we are committed to now. We hope that the game-changing nature of the new deal, the involvement of new players and the creation of new markets and financing tools will create a host of opportunities as well as driving real behaviour change.
Dr Whitehead
My hon. Friend is tempting me into an entirely different debate, in which there are very interesting considerations relating not least to a new report on the renewable valuation around our coasts and on our land and how we might be able to use those renewables for our long-term, as well as our shorter-term, future energy supply. I suspect, however, that if I were to address that topic, you might suggest that I have strayed rather far from the issues we are debating today, on which I do want to concentrate, Mr. Deputy Speaker.
Energy efficiency is a crucial component of our future energy landscape. I am pleased that the energy efficiency ambitions that the new Government have set out continue those proposed, and acted upon, by the previous Government. I recognise that the new ministerial team has strong personal commitments to these issues, and therefore energy efficiency has a bright start in terms of ambition and of understanding that this area is crucial. After all, 40% of our energy is consumed in buildings and that represents 40% of our carbon emissions. About 80% of household energy goes on heating our homes and water, and that alone represents some 13% of the UK’s greenhouse gas emissions. Therefore, getting a serious grip on energy efficiency in our homes and commercial and industrial buildings offers potentially enormous, and relatively early, rewards in respect of our overall position on carbon emissions and energy consumption.
However, we as a country face this situation from a poor position historically. It is true that the previous Government made enormous strides in improving energy efficiency, particularly of public sector homes, and homes provided by registered social landlords. The Committee on Climate Change report that was published today conspicuously states that its indicators for activity on loft insulation, cavity wall insulation and energy efficiency in homes were met during the last year of the previous Labour Government. Considerable progress has been made, but our private sector homes remain energy-inefficient. The average standard assessment procedure rating in private sector homes is 49, which is a long way from level that we ought to aim for if we are to have a reasonable expectation that homes will be relatively energy-efficient and will have a low output of waste and energy emissions as far as the activities of the people who live in them are concerned.
We can all agree that this House has substantial energy-efficiency ambitions, that there is urgent action to be undertaken and that a number of programmes are in process and a number of ambitious new programmes, some of which we have heard about this afternoon, could get under way to address those issues. We need to examine whether the ambitions are being met, whether we have the ability to make those changes in practice and whether other things might be done to ensure that the ambitions are realised.
As a small indicator of the difference between ambitions and realisation I shall discuss the new part L of the building regulations, which were published recently. I had anticipated that it would contain new guidelines on the energy efficiency of circulation pumps in central heating. If, as was suggested during consultation by the previous Government, the regulations had mandated new and very energy-efficient circulation pumps, we could have saved as much as 2% of the electricity consumption in households—that could have been done by that measure alone. However, the new regulations state that it is perfectly okay to have circulation pumps that are A to G rated, not the A to C rated that had been anticipated. That shows an immediate difference between ambition and practice. I sincerely hope that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), who has been inviting various other people to come to see him about various issues, will invite me in the very near future to a round-table meeting on circulation pumps and why they should be more energy-efficient. I am sure that he will find time in his busy diary to have a substantial round-table meeting on that pressing issue. I cite that issue as a small example to show that one needs to keep one’s eye closely on the difference between the reality of achievement and the ambition that one has when one puts forward new plans.
The plan that has been the centrepiece of this afternoon’s discussion is the green deal. I feel like someone who is being told that a great new concerto is coming out, that it is about to be performed and that when people turn up to the concert hall they will find that it is terrific, but who has not been told whether it is by Mozart or Salieri. I presume that when we get to the concert hall we will find out whether the green deal is as good as we are led to believe. On the surface, a green deal that takes away the idea of an up-front loan and places the onus on the long-term consequences of the bills of those household consumers, their descendants or the next people who come along to the house appears to represent a positive way forward. We must recognise that that has limitations. Just as the pay-as-you-save scheme implemented by the previous Government had its limitations, this green deal also has potential substantial limitations.
Gregory Barker
This is a very important point. The hon. Gentleman is absolutely right. We do not for a minute expect the green deal to be able to cover the whole gamut of energy-efficiency installations. I think I said in my opening speech that there will be hard-to-treat properties and that some of the most vulnerable fuel-poor will not be covered sufficiently by the green deal pay-as-you-save model. That is where we will look to restructure completely and focus even more the ongoing long-term energy supplier obligation.
Dr Whitehead
I thank the Minister for that clarification. He anticipates, to a little extent, some of the things that I was going to say about the consequences of the green deal and the issues that surround it, such as the problems of hard-to-treat homes, which we need to take seriously if we are to make progress as far as energy efficiency is concerned.
Let us be clear: the green deal will concern itself primarily with owner-occupied houses in the private sector where there is a deal on hand. I stand to be corrected, but it seems to me that there is substantial work to be done as far as the social housing sector, the public housing sector and, indeed, hard-to-treat properties are concerned.
Gregory Barker
The beauty of the green deal as conceived and as we intend to implement it is that it applies to all sectors of housing. It is most applicable to the area that has been hardest to treat and in which there has been least progress in the past—that is, the private rented sector. It will finally cut through that Gordian knot as landlords will not have to pay the up-front costs for benefits that will accrue to their tenants. There will now be a real incentive and no financial disincentive for landlords to upgrade their properties and increase the quality of life of their tenants while decreasing their energy bills. That will be a real bonus.
Dr Whitehead
Again, I thank the Minister for that clarification. The beauty of the concert that we are about to hear is being talked up again. However, the questions of hard-to-treat properties, rented properties, landlords and partnerships are all issues that we must consider very carefully in deciding how the green deal and other elements will work best together as far as energy efficiency is concerned.
We have heard mention this afternoon, for example, of the partnership between local authorities, third sector organisations and consumers in the comprehensive redevelopment of energy-efficiency retrofitting of homes. We have heard about the very good example of Kirklees borough council. Interestingly, the example of Kirklees was based on the injection by Kirklees of £10 million into the process in partnership with other local authorities.
In that context, thinking, among other things, about the debate that we had in this House yesterday on local government financing and local government cuts, I ask a question of myself. As a result of the cuts being handed out to local authorities, will there be local authorities that have £10 million to invest in future partnership arrangements? That will be very important in getting progress on the future arrangements represented at present by the community energy saving programme as far as whole-area developments in local authority areas are concerned. Will the enfeeblement of local authorities’ ability to undertake such new initiatives be such that we will have eliminated one of the partners in that process in the not-too-distant future?
I have a small point to make regarding landlords. The changes in housing benefit that are coming about might cause landlords at least to question whether to invest in their properties given the return that they might get in rent, so there are side effects, in relation to other policy decisions, that might have an impact on ambitions for the green deal.
One important issue that I have mentioned is whether the green deal simply includes passive insulation and energy-efficiency measures such as loft insulation and cavity wall insulation. Does it go beyond that to include householders’ ability to generate their own energy and therefore to operate much more efficiently in terms of net emissions? In the code for sustainable homes, the target for 2016, in terms of new build housing, will include accession to a level 6 arrangement, but that could not be adhered to without some form of microgeneration power production being built into those homes when the zero-carbon target is agreed.
The Minister is right to say that we should not substitute microgeneration for energy-efficiency measures, as they are consequent on each other. However, in a real programme for developing energy efficiency in homes over the medium term, microgeneration has to be seen as very important within any efficiency drive in those homes. If we simply eliminate microgeneration from the process, we will put back for a considerable time the possibility of microgeneration following on from those energy-efficiency arrangements.
It was interesting to see nothing in the Budget for Warm Front. I assume that, in the vision put forward by the Government, it will effectively be subsumed into the green deal because it apparently has very wide effects. If Warm Front is simply collapsed within a few years’ time, the works that have been undertaken under Warm Front, which include the possibility of putting microgeneration devices into homes, will be lost and a group of hard-to-reach consumers who might not be particularly advantaged by the green deal will also be lost in the process.
Gregory Barker
On Warm Front, let me assure the hon. Gentleman that more than £300 million is available for a programme of work through this year and the winter to March 2011. That stands, and no long-term decisions have yet been made about Warm Front. As I have said, we recognise that there will always be a need for special arrangements for the most vulnerable people and hard-to-treat homes, and that we cannot just depend on pay-as-you-save schemes. Obviously, Warm Front will be subject to the comprehensive spending review this autumn, as all other Government programmes will be.
Dr Whitehead
I thank the Minister for that further clarification, but his comments support my feeling that there is no clear understanding of what will happen to Warm Front after the current period of investment in that programme expires. Similarly—this relates particularly to my points about the need to include microgeneration in the aim of improving general household energy efficiency over the medium to long term—there seems to have been no clarification regarding the future of the renewable heat incentive. If, for whatever reason, the renewable heat incentive is abandoned—a process that I suspect is under way at the moment—the ability of homes to install equipment vital for long-term energy efficiency, such as solar thermal devices, or ground source or air source heat pumps, will be severely undermined.
The Minister has said that households that enter a deal, whether it is loan-based or part of a pay-as-you-save arrangement, will have to pay the money back when the investment period comes to an end. The RHI is therefore absolutely essential, and I fear for the sector’s future if it is abandoned or undermined.
Gregory Barker
I am not in a position to make a statement about the RHI today, but I can assure the hon. Gentleman that we are committed to an ambitious renewable heat agenda. We hope to make an announcement as soon as possible.
Dr Whitehead
I thank the Minister for that intervention, and for promoting me to the Privy Council. I look forward to that announcement, and I sincerely hope that my concerns about the RHI are misplaced. It is essential that the initiative goes ahead next year, so that it can underpin the revolution that is taking place in the development of microgenerated heat.
The Minister also said that it will cost something like £10,000, at the very least, to treat each hard-to-treat property. Inevitably, therefore, such properties, whatever they are like, will be outside the green new deal. It is essential that programmes are brought in alongside the green deal at an early stage, to ensure that the 6 to 7 million homes in the hard-to-treat category get the energy-efficiency uprating that they need.
The other point that I want to emphasise is that energy efficiency is not just about conserving the energy that we use in domestic properties. We have heard already this afternoon about the great gains that can be made by increasing energy efficiency in commercial and industrial properties, but we also have to look at the enormously inefficient way that we produce our energy at the moment. By the time that a single kilowatt comes out of a conventional electricity power station, 55% cent. of the energy in the fuel used to produce it has been lost. A further 15% of the energy in the original source is lost in transmission, and a further 10% is lost through the inefficiency of household equipment. In a very real sense, therefore, the so-called “10% light bulb” is real, and that is because, by the time we switch a light on, we have squandered 90% of the energy that we could have used to power the bulb.
For that reason, arrangements such as district heating and combined heat and power are absolutely vital if we are to make progress in using energy in the best way that we can. There is a huge capacity for CHP district heating schemes in UK cities. For example, Aberdeen Heat & Power Ltd has shown how that can be done, and similar results can be seen in Southampton and Birmingham. We need to take the role of CHP very seriously, either at the micro level—my hon. Friend the Member for Sheffield, Heeley (Meg Munn) spoke about that earlier in connection with home energy improvements—or through district heating schemes. Finally, industrial companies that have their own heat networks can have their existing boilers replaced with CHP plants. Such commercial schemes can result in enormous gains in energy efficiency. Local authorities were given powers and resources to develop district heating schemes in the paper on home heating and energy supplies put forward by the previous Government. It would be encouraging if the powers envisaged under that programme were preserved and enhanced by this new Government.
We should not neglect the role that energy efficiency plays in combating fuel poverty. If all homes had a standard assessment procedure rating of, say, above 65, it is unlikely that much fuel poverty would exist in this country, simply because it would be difficult for households to spend more than 10% of their income on fuel. It is predicted that the target of eradicating fuel poverty under the terms of the Warm Homes and Energy Conservation Act 2000 will be missed by a large margin, and the main reason for that is that as fuel prices rise, more people are placed in fuel poverty. As we have already discussed this afternoon, enormous rises in fuel costs have blown off course some very creditable efforts to combat fuel poverty, not least efforts that target the homes of the fuel-poor to make them more energy-efficient.
For every 1% rise in fuel prices, 40,000 people are placed in fuel poverty, so we need to be aware of the obligations being placed on energy companies and the effect that they have on additional prices. If, as a result of the green deal and other new arrangements, we place additional obligations on energy companies and they pass on the effects of those obligations to their customers, we will find not only price rises but many more people going into fuel poverty as those new schemes unfold. There are already obligations on energy companies relating to carbon capture and storage, the carbon emissions reduction target, the community energy saving programme, and the smart meter roll-out. I imagine that the acceleration of that roll-out, which was recently announced by the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), will place additional obligations on companies, as they will have to underwrite that roll-out.
Either those additional obligations should be underwritten with public money to limit their effect on fuel prices, or energy companies need to be prevented from passing on the effect of the obligation to the customer. In that context, we need to look at the role of Ofgem. Should it be translated into a champion of escape from fuel poverty and an agent of a rapid rise in energy efficiency, or should it simply pass on the price of those changes to customers? That is worth examination.
I applaud the idea that we need to move rapidly on energy efficiency. If the green deal is as good as its proponents suggest, I will applaud it taking forward from the previous Government ways to build energy efficiency into how households work. However, we need to look at the detail very carefully to ensure that, this time, we get it absolutely right, because we have only a very short time in which to do so.