Energy Prices Bill

Lord Foster of Bath Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Lord Foster of Bath (LD)]

My Lords, on these Benches we too support the broad thrust of the Bill, but like the noble Lord, Lord Lennie, we wonder what it might look like by the time it gets to us in Committee just next Monday. We also share the concern of the Delegated Powers and Regulatory Reform Committee about the unfettered powers being given to the Secretary of State without any time constraint—powers that enable the Secretary of State to make large changes to the sector without consultation or the right to appeal. As others will no doubt point out, we are concerned that the measures in the Bill treat renewables such as wind and solar less favourably than oil and gas. However, I will concentrate on two issues not covered in the Bill which I believe should be.

The Long Title of the Bill is:

“A Bill to Make provision for controlling energy prices; to encourage the efficient use and supply of energy; and for other purposes connected to the energy crisis.”


So, in addition to pricing and supply, the Bill is also meant to be about the efficient use of energy, yet it is hardly mentioned. Unlike those in many other countries, it seems our Government have no strategic interest in encouraging anyone in the UK to save energy. The International Energy Agency describes energy efficiency in priority terms as the “first fuel”. It reckons that at least half of the improvements needed to deliver net zero by 2050 will come from greater energy efficiency. However, in the UK, far too many people cannot use energy efficiently: their homes leak heat because they are poorly insulated. Around 15 million homes are below energy performance certificate band C. In other words, 15 million homes are inadequately insulated, so they cost more to heat—on average, almost £800 a year. Yet in the absence of a clear national programme, home insulation work has plunged by 50% over the past year, leading Doug Parr of Greenpeace to say:

“It’s frankly astonishing that this dip in insulation rates comes at exactly the time we should be ramping up this proven, long-term solution to the cost of living crisis.”


Even the Conservative-inclined Sun newspaper said in August:

“Householders faced with astronomical heating costs need lagging for their homes, not a government lagging behind.”


So, measures to improve energy efficiency should be a top priority for the Government, with a clear strategy and evidence of real commitment.

As the Minister knows, I have spoken many times about the need to establish the Government’s own energy efficiency targets in law. I have argued that it is the retrofit industry that will deliver the Government’s energy efficiency targets, but the industry has lost confidence after being let down by numerous failed schemes. The industry has shrunk, and the amount of energy efficiency work has fallen dramatically. The industry itself argues that to persuade it now to invest in research, training and equipment, it needs the confidence that putting targets into legislation would give. Conservative Ministers, including the current Chancellor, have claimed numerous times to believe in doing just that—enshrining targets into law. A Defra document states:

“A legally binding long-term target gives a clear signal to industry of the direction of future government policy. This may increase investor confidence and encourage industry to invest in infrastructure and research that will drive innovation”.


The Government have two main targets: for all fuel-poor homes to be EPC band C by 2030; and for all remaining homes to be EPC band C by 2035. However, to date, the Government have refused to put those targets into law to make them legally binding as the industry has requested. I have received no credible explanation for this failure, so I will table an amendment to the Bill in Committee. Last night, your Lordships agreed an amendment to the Social Housing (Regulation) Bill which did at least put an energy efficiency target for social housing into legislation. I hope noble Lords will agree that all the Government’s energy efficiency targets should follow suit. I hope the Minister will explain in detail the Government’s plans in relation to energy efficiency and why it is absent from the Bill.

I now turn to another issue I recently raised which I believe should form part of the strategy to improve the supply of energy: the role that solar energy can play. Residential solar systems are already very popular, reducing bills and often being able to supply excess energy back to the grid at times when it is under pressure. I recently installed solar panels on my own home, adding to the 1.2 million homes that have done the same. Together, these domestic solar PV systems have the same generation capacity as the forthcoming nuclear plant at Hinkley Point. We should be encouraging more households to do the same and helping those with existing systems to get them working more efficiently.

In the March Spring Statement, it was announced that certain energy-saving materials would be eligible for a 0% rate of VAT on both labour and parts, and I welcome that. Solar panels and batteries, which store energy from solar panels for later use, are covered if fitted at the same time, but any battery added separately at a later date is not covered. Retrofit batteries will continue to be subject to VAT at 20%. Modern solar systems usually include a battery, but many systems installed just a few years ago do not. With more efficient and cheaper batteries now available, it makes sense for those with older systems to add a battery. The solar energy their panels generate can be used far more efficiently to the benefit of the home owner and the country overall. However, the 20% VAT rate is likely to deter many. I believe that retrospectively added batteries should also benefit from zero VAT and will bring an amendment to that effect in Committee.

Indeed, there are many other energy-saving items such as double glazing and draught excluders which are not covered by the zero VAT rate. Their take-up would increase were they to be included, which would again be to the benefit of the home owner and the country. I hope the Minister can share his view on this proposal.

[Lord Framlingham (Con)]

I am listening to the noble Lord’s speech with great interest. I understand that there are thousands and thousands of acres of factory roofs in this country. Would it not be a very good idea for them all to be encouraged to have solar panels?

[Lord Foster of Bath (LD)]

Indeed. The noble Lord is absolutely right. I was going to come on to that point. The UK Warehousing Association says that if we could get solar panels on all its warehouses, we would get 15 gigawatts of energy. The difficulty—perhaps the Minister can comment on this—is that there is difficulty in many cases with connecting to the grid. We need to find ways to help them achieve that for the benefit that the Minister just mentioned. I hope we can hear the Minister’s views on these issues, without him just shrugging them off as he has in the past, saying that this is a matter for the Chancellor.

Just like warehouses, other forms of non-domestic solar are vital; solar farms provide one such example. But we hear from media reports—the Minister can perhaps confirm whether this is true—that the Environment Secretary wishes to prevent new ones being built on the apparent basis that they are a threat to food security. Yet solar farms are a major UK success story that does not require subsidy. The chief executive of the trade association Solar Energy UK told the Financial Times last week that there is more than £20 billion of private capital in the project pipeline—investment, as well as the jobs and extra finance to support farmers it would bring, that would be lost under the Environment Secretary’s apparent plans. Yet there is no serious evidence to suggest that solar farms present a threat to food security. In fact, the opposite is true. Land around and under solar farms can and does support the UK’s nature recovery and biodiversity targets with wildflower meadows, ponds and wetlands. Solar farms drive investment, create jobs and generate clean electricity. I hope we will hear from the Minister that what we hear about the Environment Secretary’s views is incorrect.

As I said at the beginning, we support the main provisions of the Bill, but believe it is a missed opportunity to, for example, set out a clear strategic plan for addressing energy efficiency and expand and make better use of solar energy.

--- Later in debate ---

[Lord Callanan (Con)]

There are separate provisions allowing generators to invest in clean power. The aforementioned contracts for difference scheme is doing exactly that, providing the incentive for them to invest in clean power. We have increased the number of CfD rounds that we have launched. As the noble Lord, Lord Teverson, said, this has proved to be an immensely successful scheme. I pay tribute to the officials who designed it. It has been so successful that most of the rest of Europe is proposing to adopt a very similar scheme for their own wind generation. It is precisely because that mechanism exists and provides guaranteed revenue for their investments that those incentives that the noble Baroness refers to already exist.

The right reverend Prelate the Bishop of Manchester, the noble Baroness, Lady Young, and the noble Lord, Lord Grantchester, all raised important points regarding the default tariff cap. The energy price guarantee will now determine the prices that households pay for their energy. However, we are retaining the price cap to help deliver this energy price guarantee. Clause 20 will ensure that Ofgem continues to calculate the cap level to determine what it costs an efficient energy supplier to provide a household with gas and/or electricity. Of course, this will not determine the prices that householders pay, but it will enable the Government to identify what level of support is needed to deliver the prices in this energy price guarantee. The price cap is a mechanism that has been proven to prevent excessive charging and to reflect the real costs of supplying energy. Retaining it will ensure that suppliers price in line with the energy price guarantee and that public funds are used efficiently.

The noble Lord, Lord Foster, gave his view that the Bill treats renewables less favourably than oil and gas. No energy firms, however they produce, should be profiting unduly from Russia’s war in Ukraine, whether they generate low-carbon or fossil-fuel energy. Current price levels in electricity markets are far higher than any energy firm could possibly have envisaged or forecast, or would have predicted they would need, to continue investing in renewables.

Low-carbon electricity generation from renewables and nuclear will be key to securing more low-cost homegrown energy, which is why we continue to support investments in the sector. I remind noble Lords of the point I have made continuously: the schemes have been extremely successful. We have the highest proportion of offshore wind energy in Europe, by far. We have the second-highest proportion in the world, and we have extremely ambitious plans to continue investing and producing more of it, precisely because the scheme has proven so successful and is delivering much cheaper power. It is our flagship scheme and it has worked a treat, as I said—so successfully that other countries are now adopting it. In 2023, the scheme will move to annual auctions, helping to further accelerate the deployment of clean low-cost generation, which is something that I know all contributors will welcome.

The energy price guarantee and the energy bill relief scheme support millions of householders and businesses with rising energy costs. The Chancellor made clear that they will continue to do so from now until next April. Looking beyond that, I am sure noble Lords would be interested to know that the Prime Minister and Chancellor have agreed that it would be irresponsible for the Government to continue exposing the public finances to unlimited volatility of international gas prices. Therefore, it is the Government’s intention that, after this winter, support is better focused on the most vulnerable households and those least able to pay, with greater incentives to improve energy efficiency.

The noble Lord, Lord Foster, raised issues on the essential importance of encouraging solar energy use in households. I completely agree with the noble Lord. We are committed to solar power, which not only is good for the environment but at the moment represents the cheapest way to generate electricity in the UK, albeit intermittently. The British Energy Security Strategy sets out an expectation of 70 gigawatts installed solar capacity in the UK by 2035. To achieve that and meet this increased ambition, we will need a significant increase in both ground-mounted and rooftop solar in the 2020s and beyond. The noble Lord will be pleased to know that there is a healthy pipeline of ground-mounted projects, currently amounting to around 19 gigawatts across Great Britain, which either are in scoping or have already submitted planning applications.

The noble Baroness, Lady Worthington, asked me yesterday and again today about our negotiations with Norway.

[Lord Foster of Bath (LD)]

I apologise; I thought the Minister was going to continue points about solar. Before he finishes, could he respond to the question I asked on the Environment Secretary’s plans to stop further solar farms? Could he update us on that situation?

[Lord Callanan (Con)]

I have referred to the pipeline of solar for which planning permission has already been granted or that is in scope. I think the noble Lord can see that there is a considerable pipeline of solar plants that are already coming on stream and that our target remains in place.

Energy Prices Bill

Lord Foster of Bath Excerpts

Committee stage
Monday 24th October 2022 Lords Chamber

[Baroness Bloomfield of Hinton Waldrist (Con)]

I am very sorry, but the Companion is quite clear: if you were not here at the start of the debate, you are unable to speak.

[Lord Foster of Bath (LD)]

My Lords, I am sad that we cannot hear the words of the noble Baroness, and I very much support her amendment, because she, like me, believes that this Government are not doing anything like enough to reduce energy consumption, the amount of energy expended nor making the most efficient use of the sources of energy available to us.

Other countries are doing far more than we are. Germany, for instance, is rushing to try to reduce its energy consumption by 20% in a very short space of time; we are doing very little about that. On energy efficiency, it was only 11 days ago that the European Union countries got together to celebrate Energy Efficiency Day, and Mr Frans Timmermans, the Commission vice-president responsible for the Green Deal, stated the bleeding obvious, because he said:

“saving energy, not using energy, is the cheapest energy”.

I agree with him, given that it is perfectly possible, given the Long Title of the Bill, as my noble friend on the Front Bench pointed out, to have done far more on these issues.

In truth, from this Government, we have had scheme after scheme which has floundered and left the industry in total disarray. As a result, since I was a Minister with some responsibility for this, the amount of energy efficiency work in this country has declined by a staggering 90%. It has gone down by 50% in the past 12 months alone. What we get from the Government is a lot of fine words—the Minister trots them out from time to time—from various government documents. The trouble is that if you follow through on what is said, you discover that there is not much action to back it up.

As an example, the Clean Growth Strategy, a document produced by this Government in October 2017, stated very clearly that:

“The Government will look at a long-term trajectory for energy performance standards across the private rented sector, with the aim of as many private rented homes as possible being upgraded to EPC Band C by 2030, where practical, cost effective and affordable. We will consider options with a view to consulting in 2018”.


The consultation took place, and was in fact extended because of Covid to 8 January 2021. That was 21 months ago, yet we have still not had any evidence of a response from the Government. When are we going to get the results of the consultation and the action promised by the Government around privately rented homes?

The situation is made even worse when you look at socially rented homes, in which the vast majority of those who are less well off are living. Five years ago, that same document said that the Government were going to

“look at how social housing can meet similar standards on the same timetable.”

I understand that consultation is needed before you can go ahead, but one would have thought that by now the consultation would have started. Yet in a letter to me and many other noble Lords in the last few days, the noble Baroness, Lady Scott of Bybrook, wrote:

“The Government has now committed to consulting on introducing standards in the social rented sector. This will happen within six months of the Social Housing (Regulation) Bill gaining consent”.


The consultation has not even started for something promised five years ago.

We have a lot of fine words from the Government, but in many areas the action does not take place. This is why it is so important that we have Amendment 8 on the statute book, at least in the very minimal way that requires the Government to give us a report on what is happening and what the benefits really are.

In relation to that, I acknowledge that the Minister pointed out at Second Reading that the Government have introduced one new scheme relating to energy efficiency, called ECO+. It will somehow run alongside ECO4, which was preceded by ECO1, 2 and 3. However, we do not know how that will work. It would be helpful to have a little more detail about how the two schemes will work together.

I have a specific question to ask the Minister about this new wonder-scheme. We know from all the evidence that the previous ECO schemes have been raising improvements to people’s homes. The Government claim that those schemes have led to improvements saving people up to £1,000 a year. Looking at the ECO+ documentation, my understanding is that the scheme is in fact expected to lead to a saving for consumers of about only £200 a year. The difference between the savings of the early ECO schemes and what appears to be that of the new scheme is huge. I hope that the Minister can explain to me why that is the case.

I have a couple of amendments down, which I will speak to very briefly. Amendment 10 is based on something from the Government’s own document. On page 12 of this year’s British Energy Security Strategy—which, incidentally, they described as ambitious—it says:

“We will cut the cost for consumers who want to make improvements”


to energy efficiency by

“zero-rating VAT for the next five years on the installation of energy saving materials”.

Some of that was introduced by the then Chancellor—I cannot remember how many Chancellors ago that was—back in the Spring Statement. I welcomed this at the time, but I genuinely do not believe it went anywhere near far enough. A large number of energy-saving materials were not included in the list.

At Second Reading, I raised one such example: retrofitting a battery to an existing solar heating scheme. Introducing a battery makes a system infinitely more efficient, which is a benefit to the homeowner and a benefit to the nation as a whole because more energy can be put back into the national grid, not least at times of high demand. At that time, I proposed that VAT on additional, retrofitted batteries should be zero-rated. Batteries needed to be retrofitted because, when many schemes were first introduced, batteries were either too expensive or people did not see the benefits of them.

I then looked at some of the other items that were not in the list. I was staggered to discover that something as simple as double-glazing was not included. The figures are staggering: 86% of homes already have double-glazing but a high proportion—more than a quarter—is old fashioned and nowhere near as efficient as modern double-glazing. The relevant associations which produce the figures are firmly of the view that, if all windows could be brought up to current standards, a staggering £14.5 billion could be saved.

I am not asking the Government to pay for all the double-glazing to be done. However, we know from all the research evidence that reducing VAT would significantly help many people take on the additional burden of uprating their windows to modern double-glazing standards. Evidence has shown the impact of the reduction in VAT in other areas. I am convinced that reducing VAT on double-glazing and on some of the other items mentioned in Amendment 10 would be of enormous benefit.

Finally, I turn to Amendment 11 in my name. I draw the Minister’s attention to my earlier speeches. He has heard me speak on this subject in one form or another on numerous occasions, so I will not repeat it all. Suffice to say that all the evidence shows that this Government claim to believe that putting targets into legislation is beneficial for driving forward investment. I have 60 quotes from current and former Ministers and from government departmental documents that back up the claim that targets put into legislation ensure that action happens.

Amendment 11 is simple. It seeks to put into legislation the targets that the Government have already set for improving the energy efficiency of our homes. It would bring fuel-poor homes up to EPC level C by 2030 and all the rest of the housing stock by 2035. In this country, unlike, for instance, in the countries of our neighbouring friends in the European Union, we have far less efficient homes—15 million homes are below the appropriate energy efficiency targets set by the Government.

The industry has made it very clear that if it is now to invest in the research, training and equipment needed to start doing more work in this field, it needs to have the confidence of targets placed into legislation. The Government have refused this on numerous occasions so far, and not once have I heard a good reason from any Minister. I am optimistic that, on this occasion, I might get a decent reply. I look forward to hearing it.