Energy Bill

Lord Cameron of Dillington Excerpts

Thursday 18th July 2013 Grand Committee

The other important issue is that, if we are going to have some sort of auction eventually, probably it should be a separate auction from the general capacity market auction. We will come back to that in our discussions of later clauses today. But the question of whether there should be more than one auction obviously has some importance here. We need to have some sort of clarification on the way in which the Government see these pilots being run, including how long they will last, when the results will be reported, and how large the pilots will be. I understand that the current indications from the department are that a demand reduction pilot will not be up and running for a number of years, which is extremely unfortunate. Reduction in demand is an extremely good way to solve some of the problems we are discussing today. Therefore, I very much hope that in replying to this discussion, although this amendment will not be pressed, the Minister will give an indication of the way in which this is to be explored.

[Lord Cameron of Dillington]

My Lords, I support the theme of these two amendments, particularly the latter one. It is widely recognised that energy demand reduction is one of the cheapest ways to achieve decarbonisation of our economy. I have seen figures—I am not sure whether they came from DECC—which state that energy saving could reduce demand by 26% by 2030. I imagine that that 26% is not from where we are now but from where we would be if we did not have any form of energy demand reduction schemes in place.

It worries me, as the noble Lord, Lord Roper, was saying, that DECC originally said that it would be implementing energy demand reduction via the capacity market. Perhaps I am quite glad that the noble Lord did not find any reference to it in his reading last night because maybe we have got that wrong. To be honest, it makes absolutely no sense. Why wait for the capacity auction next year and implementation in four years’ time before introducing demand reduction schemes? Why wait for a capacity crunch before introducing them? We need these schemes to start now or as soon as possible. As the noble Lord, Lord Teverson, said, we are not talking about energy security or even capacity margins; we are talking about emission reductions across the economy.

I think that I am happy to accept that the Government might want to run pilots here, although the noble Lord, Lord Roper, was absolutely right that we need to put details in those pilots; for example, when the results will be, what will happen afterwards and so on. We have seriously to get on with this.

Lots of opportunities are available. Smart meters are the first that come to mind. A supply company can run machines within a business or a household that are very expensive on electricity—tumble dryers and even dishwashers can wait until the smart meter tells it to turn itself on. Obviously, it should be allowed to be overridden by the householder but the householder must know exactly what cost there will be if he or she overrides the meter. There will be certain times—obviously, when people come home from work and turn on the kettle, or when they get up from watching a film or “Coronation Street”—when the electricity companies know intimately when the peak demand will be. The prices should be allocated accordingly.

I should also say that in future, smart meters could—nay, should—be sensitive to the amount of supply available. If a large proportion of our supply such as photovoltaics or wind turbines is dependent on the weather, a smart meter should know what the weather is to be tonight at 6 pm when the peak demand is coming and therefore what the capacity margin will be. For instance, in Germany last week—and probably this week as well—at certain times, 33% of the national electricity supply came from photovoltaics. Clearly, at those times there was no shortage of power in the country and no need to restrict demand at all by cost.

The noble Lord, Lord Teverson, also said that demand reduction could be encouraged by better energy rating in housing. I could not agree more. Again in Germany, 360,000 homes have been brought down to near zero emissions by lending money to householders at 1%. Perhaps a pilot could be encouraged on those lines; as we all know, the Green Deal has not been very effective as yet.

However, the most important move, because it throws down the gauntlet to the entrepreneurial flair of industrialists, business people and householders themselves, is to pilot and introduce as soon as possible energy efficiency premium payments. Those schemes have worked very well in the USA and, I believe, could work in the UK if bundled together with grants for capital investment. That could, incidentally, include hundreds of household or office-based batteries linked to the smart meter—so electricity is going in and out of those batteries. Obviously, some help would be needed with the capital expenditure in those circumstances.

The main point is that the Government have to drive that agenda, not just sit back and let it happen via the rather clunky capacity mechanism, which was never really designed for electricity demand reduction in the first place.

[Viscount Hanworth]

My Lords, I, too, express my appreciation of the intentions of the noble Lord, Lord Teverson, and the noble Baroness, Lady Parminter, but I should like to pick holes in the amendment in much the same way as has my colleague, my noble friend Lord Davies. Whereas he considered proposed paragraph (f), I shall concentrate on proposed paragraph (g). It may well be that the amendment is more sophisticated than it seems, because it is possible that the noble Lord, Lord Teverson, is trying to strike a judicious balance between saying something felicitous and saying something that will get past the Minister.

Let me try to deconstruct what is being said in paragraph (g). It is an injunction,

“to progressively increase the energy efficiency of the United Kingdom as measured in terms of quantity of energy used per unit of GDP”.

That is most unlikely to impose a binding constraint. The fact is that the ratio has been decreasing monotonically since 1950, at least, so that in 2010, we used about half the quantity of energy per unit of real GDP as we did in 1950.

I want to make a bigger point than that. I think that we should approach most of what we read in the Bill in a spirit of cynicism and scepticism. I am sorry if that sounds strong, but if we analyse a great many clauses in detail and think of the circumstances in which they would be applied, we realise that they impose non-binding constraints and impose no particular behaviour by the Government that might staunch emissions, improve efficiency, or whatever. I do not fully understand the motives of the noble Lord, Lord Teverson, and they may, as I said, be more sophisticated than they seem but, if I may be forgiven for saying so, his amendment would perpetrate exactly such an ineffective provision. I hope that he will forgive me.