Dieter Helm Energy Review

Claire Perry Excerpts

Tuesday 24th April 2018 Westminster Hall

[The Minister for Energy and Clean Growth (Claire Perry)]

It is a pleasure, as always, to serve under your chairmanship, Mr McCabe.

I understand about axolotls and chrysalises, but I did not know what a hospital pass was. I assumed that it was something people put in their windscreen when at Great Western Hospital. It made me very grateful that we unveiled the statue of Millicent Fawcett today— 11 blokes and now one woman in Parliament Square. Perhaps we can have some terms everyone understands in the future.

I thank the hon. Member for Blackley and Broughton (Graham Stringer) for securing the debate. We could discuss the issues of science and climate change, but that is not why we are here. The points he made were very good ones. The challenge of how to make policy in a way that keeps the lights on and the costs down, does not burden future generations with unnecessary costs and achieves carbon emissions reduction targets, involves important questions for debate, so I am grateful.

Before I get on to some Helm comments, I will set out a couple of ground-preparation points. We are at a tipping point. When we used to talk about low carbon, it was axiomatic to think about high cost. As we heard very eloquently from my hon. Friend the Member for Wells (James Heappey), those trade-offs increasingly are going away. I accept that renewable energy without the necessary level of battery, solid state or liquid storage will not keep the lights on and give us the hot showers we want, which is why I am such a proponent of gas, particularly clean gas, in the system in future.

Tackling our climate change issue and delivering on our carbon commitments, which are world leading in their scope, does not mean that we are looking forward to a high-cost, low-economic productivity future—quite the opposite. As we have set out in the clean growth strategy and continue to debate, we are employing more than 400,000 people in the low-carbon economy, which is bigger than aerospace in the UK. That economy is growing very rapidly, creating great export opportunities, and is doing so in the knowledge that we have decarbonised more and grown our economy more than any other G7 country. That is something of which successive Governments should be very proud.

I want to reassure the hon. Member for Blackley and Broughton that when we think about technological investments in the future, we are trying to apply a triple test. First, what happens to the carbon emissions? Can we see emissions actually coming out—can we count them? Secondly, can we see a cost-effective pathway to deployment? Can we deliver technology that will reduce costs rapidly? Thirdly, does this give us a competitive advantage based on what we are doing well in the UK, which we can export? It is not just us on this low-carbon journey; the world is pivoting to a low-carbon economy. Trillions of dollars are being spent on low-energy production and transport.

The hon. Gentleman talked rightly about coal; as a founding member of the Powering Past Coal Alliance, I wish we could persuade all countries that it is the fuel of the past. Equally, it is not right for us to dictate to some of the emerging economies their energy mix. We have to encourage and support them. India has said that it wants its entire car fleet to be electric by 2030. That will have a material impact on the price of that technology around the world. All that creates a reinforcing, positive spiral. If we can demonstrate leadership in technologies and other countries do, too, the price will drop, as has been seen with solar panels. That means that more countries can adapt and we get ourselves to a better place.

The focus on low carbon is not a win-lose situation; it is a win-win situation. The emphasis on innovation cannot be made strongly enough, which is why we have committed £2.5 billion over this Parliament just for this area of low-carbon innovation, which is part of the biggest increase ever in public spending on UK science research and innovation.

We can debate strategies, and we will, but we need to focus on costs now. Reducing costs both for consumers and for businesses is the heart of what we want to do. We have seen and heard what has happened to the input cost going into the system; I accept the point about onshore wind—the hon. Member for Kilmarnock and Loudoun (Alan Brown) and I have debated that. We have a manifesto commitment that we do not believe large onshore wind is right for England, but I am aware of other parts of the country and we are working to see what we can do.

We have seen a dramatic fall in the cost of low-carbon energy. Indeed, we have just celebrated our second period of coal-free power generation—a record of 57 hours not using coal to power our electricity in the UK. There are some other more subtle points, too. Network costs, which make up a quarter of dual fuel bills, have fallen 17% since privatisation, and the pressure is downwards on those. We have seen a dramatic increase in the level of competition in the retail energy market—there are now more than 65 suppliers. Switching levels are hitting record highs.

As hon. Members will know, I will bring back to the Floor of the House the Report stage of the Domestic Gas and Electricity (Tariff Cap) Bill next week. It sounds as if we will have strong support from all Members present. We believe that we need to do more to help that market move towards a more price-competitive place, and we want that cap to be in place for this winter.

On household energy bills, it has not just been about consumers and taxpayers investing in the future of energy generation and low carbon. Much of that investment has been offset by improvements in fuel efficiency in homes, which I believe the hon. Member for North Ayrshire and Arran (Patricia Gibson) alluded to, often directly through measures such as the energy company obligation. In fact, although prices have gone up as a result of the investment in future forms of technology, the average bill in homes has dropped by £14 since 2012, because we have become much more efficient.

[Stephen Kerr]

The Minister has not mentioned smart meters in her list. When does she feel she might be in a position to tell us where we are going with the SMETS2 meters and the connection with the Data Communications Company?

[Claire Perry]

My hon. Friend has anticipated my speech; I was also going to mention the very dramatic, large roll-out of smart meters. We know we need to move to SMETS2 and make sure that that is done as seamlessly as possible for consumers who already have a SMETS1 meter—I am happy to take that offline.

[Alan Brown]

On the point I made, does the Minister agree that there is also scope for direct Government investment in energy efficiency, rather than relying on the likes of ECO, which still makes the consumers pay for it in their bills?

[Claire Perry]

I do; things such as the warm home discount are part of the long-term commitment that we have made to ensuring that there is better energy efficiency. We are working hard to take out costs wherever possible.

The hon. Member for Blackley and Broughton represents a manufacturing and industrial constituency; we have reduced the policy impact of energy bills on our most energy-intensive industrial consumers by up to 80%. He mentioned the relative costs of energy in Europe, where we tend to do very well in terms of gas costs and not so well in terms of energy. That is often because of political choices that countries make about where they will allocate their network costs. That is exactly why we commissioned the Helm report, to understand what it is we need to do better to ensure that our cost of energy for both households and businesses is as low as it can be.

I heard a lot of conversations about not wanting Government meddling in the design of the energy system, but somehow the terms of reference were too broad and Government should have been involved in setting them, and that the report was too short. Professor Helm is one of the world-leading experts on energy markets and design. It is fantastic that he has come out with some incredibly far-reaching recommendations; it is a no-holds-barred look at how we deliver more affordable energy, keep the lights on, decarbonise, create innovation and build relationships between the market and the public sector. I will not even answer the criticisms about his remuneration; he did a great report and it was good value for money.

We have had a very vibrant debate about the report; we will not rush to respond to it. This is an opportunity when we are at a tipping point on how we generate and deliver our energy. We need to take a very sensible, sober look at what we want to do. Much of that was covered in the report—questions about the importance of energy to our economic success, the disruptors that are going along, the move from passive to active demand, zero marginal low-cost clean generation, and the need to access lower cost, effective storage technologies. The market is changing, regardless of what the Government do. All the analyses of the report benefit strongly from hindsight, which is a wonderful thing, but the hon. Gentleman’s point about complexity, and Government layering intervention on intervention, are really well made. We need a response that is sober and sensible, that sets out an energy policy or strategy for the future that can survive successive political cycles and can respond quickly to what I have no doubt will be enormous technological changes.

The job of Government is to set ambition. We are among the most ambitious Governments in the world—we are the first developed country to ask for advice on what a zero-emissions economy would look like in 2050. It is great to see other countries joining us. We are also responsible for setting a balanced budget, so that all our decisions can be made secure in the knowledge that we will have a stable financial framework. Our job is not to respond to customers who lobby loudest, but to look to work with companies that create value for consumers, so we have frameworks and stability that will stand the test of time. If we get that right, this trilemma that we always talk about of cost, carbon and security, would be solved, at least for electricity.

I thank all the Members who have spoken; it is always a pleasure to talk about this very important subject. I look forward to repeating the debate when we bring forward the response to the Helm review, but I am extremely grateful to Professor Helm for his report and for challenging us to think about these vital issues for the future.