Energy: Efficiency

Baroness Verma Excerpts

Monday 10th December 2012 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)]

My Lords, I very much welcome the opportunity to focus on this particularly important aspect of energy and climate change policy. I am grateful to my noble friend Lord Teverson for raising this debate at a very opportune time. He raised a number of points which I, too, will touch on and feel are worthy of repetition. Of course, I will try to answer as many questions as I can. If there are any I cannot answer tonight, I will write to noble Lords and place copies in the Library.

Last month, the Government not only published the energy efficiency strategy but introduced the Energy Bill, which includes electricity market reform, a landmark change that will attract the investment we need to replace our ageing energy infrastructure with a more diverse and low carbon energy mix. As noble Lords have mentioned, we have also launched a consultation on how we can further encourage electricity demand reduction. Today, we have provided the details of how the CRC energy efficiency scheme will be simplified. We are making great strides in this area. I am disappointed that the noble Baroness, Lady Worthington, thinks that the Government are not doing enough. When the Bill arrives in this House, we will have plenty of time to discuss many of these issues.

All noble Lords have made some extremely important and considered remarks, even if I do not agree with them all. However, I agree with the noble Lord, Lord Whitty, that an extremely important subject such as this, which affects everyone, needs to have a narrative that is absolutely right and understandable. Perhaps we need to communicate our messages a little more clearly.

Although debated since the 1970s, there has not been a constant focus on increasing the UK’s energy efficiency. To address this, the Government created the Energy Efficiency Deployment Office in DECC in February this year. The energy efficiency strategy is EEDO’s first significant project and it provides the platform for energy efficiency policy for the coming decades. The strategy identifies the energy efficiency potential in the UK economy, the overarching barriers to achieving that potential and the actions that we are already taking to address those barriers.

As my noble friend mentioned, we could be saving 196 terawatt hours, which is equivalent to 22 power stations, through socially cost-effective investment in energy efficiency. Greater energy efficiency can be, and is, an extremely positive force in our economy. The energy efficiency sector in the UK already accounts for around 136,000 jobs in the UK and, during 2010-11, created sales of £17.6 billion. These sales have grown more than 4% per year since 2007-08 and are due to grow by 5% per year between 2010-11 and 2014-15. Nevertheless, energy efficiency has significant further potential in the UK. With the right market we could unlock further investment in energy efficiency, helping to generate further economic growth and jobs. Our analysis suggests that the Green Deal and the energy company obligation alone could support up to 60,000 jobs across the UK in 2015.

Investing in energy efficiency measures often requires local labour, can increase the productivity of the economy by releasing resources and, over the long term, can stimulate innovation. Developing a mature, knowledgeable energy efficiency market will also open up significant further export opportunities for the UK as the global effort to combat climate change ramps up. There are also savings to be made by householders and businesses. Research has suggested that, if no energy efficiency gains had been made since 1970, current energy use would be almost double its current levels, adding about £1,000 to the average domestic energy bill.

Improved energy efficiency also has obvious wider benefits, including reducing our greenhouse gas emissions and improving our security of supply. If we can reduce our demand for energy, we can achieve a cleaner, more sustainable energy system that is less reliant on primary fuel imports. Be in no doubt, energy efficiency needs to be a key part of our energy policy mix if we are to achieve our target of an 80% reduction in greenhouse gas emissions by 2050.

Achieving these multiple benefits is not easy, and the energy efficiency strategy makes clear the barriers that we face. We need to stimulate the market, ensure that consumers trust the information provided to them and make energy efficiency salient to those who could benefit from it. Society does not currently value energy efficiency as it could.

The Government are already taking significant steps to address these barriers and deliver the necessary culture shift. We are supporting consumers to cut energy waste and reduce bills by providing help to pay for and install energy efficiency measures. Our Green Deal and smart meters policies will help households make further efficiency improvements and put them back in control of their energy use.

The Green Deal has been designed to help energy bill payers keep their homes warm while saving money. It will help finance the installation of a broad range of improvements, including insulation, double glazing, microgeneration, lighting and heating. It will pave the way for one of the biggest retrofit programmes in our history. The first Green Deals will be available to consumers from the end of January, and the energy company obligation will provide extra help for those most in need and for properties that are harder to treat. Smart meters will give consumers near-real-time information on their energy consumption helping them to control and manage their energy use and make savings. Smart meters are already available, and energy suppliers expect to install significant numbers of smart meters before the start of the mass rollout at the end of 2014.

To address energy efficiency in the wider economy, we are also providing access to finance through the recently launched UK Green Investment Bank. This includes two specialist non-domestic energy efficiency funds, worth £50 million each. With the required match-funding from the private sector, this will create up to £200 million of investment to be spent by April 2015.

On 29 November, the Government also published the electricity demand reduction consultation. This sets out ambitious, economy-wide proposals to reduce electricity demand, building on the long-term strategic framework of the energy efficiency strategy. Taking measures to cut electricity use can be much cheaper than building new generation. Our analysis suggests that there is potential to go further than existing policies, so the consultation seeks views on different ways in which this might be done using market-wide financial measures or targeted financial incentives, such as scrappage schemes.

As a package of measures, our energy efficiency policies should deliver savings of 163 terawatt hours in 2020. This is an energy saving equivalent to 19 power stations. Our strategy is to achieve every bit of this potential, but also to look for more. It is innovative ideas such as the Green Deal, the Green Investment Bank and electricity demand reduction that will help make us world leaders on improving energy efficiency. Our efforts to achieve more will come in steps, and we cannot yet anticipate everything we will achieve cost-effectively, but the consultation is there on EDR, and we should debate what can be achieved. Next spring, we will consult on audits for bigger business and seek to understand the appetite for making audits have real impact.

I shall try to respond to some of the points that noble Lords have raised. My noble friend Lord Teverson asked about the transition period. Energy suppliers will continue to make available insulation measures as they continue to undertake mitigation action in the first few months of 2013. The Green Deal offers will begin to come online in January next year.

My noble friend also asked about a comparison with the digital TV switchover. We have sought to learn from the switchover but this is not like for like—the smart meter rollout will be different; it is also is led by energy suppliers and so it cannot be on a region-to-region basis. We are confident that the industry knows that it has to do a lot of work to ensure that information is available to consumers.

My noble friend also asked about our handling of the energy efficiency directive. As well as leading on the implementation of the energy efficiency strategy, EEDO will provide the central co-ordination point for the implementation of EU energy efficiency directives. Departments responsible for policies affected by each article will feed into EEDO, which will provide support and ensure consistency.

I am fast running out of time so I think it would be appropriate if I do my concluding remarks and then write to noble Lords. It would be unfair to skip over responses very quickly without giving some detail. I thank noble Lords for their important contributions and I look forward to future debates. I hope that noble Lords will support the Government in their endeavours to strengthen the energy efficiency market in the UK. Our strategy is an important document that sets out a long-term challenge for the UK but it is important also that it sets out an opportunity. It is clear that greater energy efficiency must be at the centre of UK energy policy in the coming decades. This country has an excellent record of using its resources effectively, and energy should be no different. In achieving an energy efficient future we can increase energy affordability, reduce carbon emissions and deliver a more secure energy system.