Energy Bill [HL]

Lord Grantchester Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord Grantchester]

My Lords, we have before us a very long and technical Bill, which is largely concerned with setting up the framework to implement the Green Deal initiative. As we have heard, other key energy policy areas in the Bill relate to, among others, security of energy supplies, access to up-stream petroleum infrastructure, a special administrative regime for energy supply companies, designations under the Continental Shelf Act 1964, licensing for offshore transmission and electricity distribution, the powers of the Coal Authority and repealing measures relating to home energy efficiency.

In the gracious Speech, this Bill was called the energy security and green economy Bill. As a result, we had originally expected to see proposals about the green investment bank and further energy security measures in the Bill. We understand that the policy detail in these areas is yet to be finalised, following the publication of the energy market reform White Paper, and that we can anticipate the Government bringing forward legislation on these areas next year. Does the Minister have any estimated timeframe for the introduction of that second energy Bill?

As my noble friend Lady Smith of Basildon expressed in previous debates and in our response to the energy Statement last Thursday, we on the opposition Benches support the aims of the Bill. We support energy efficiency measures that will help people to reduce their energy use. We all recognise the necessity of security of energy supplies and the challenge to reduce CO₂ emissions in domestic properties.

Part 3 on low-carbon generation and Part 4 on the coal industry are not particularly controversial, although there are aspects on which we shall seek clarification. Part 5 repeals the Home Energy Conservation Act, the Private Member’s legislation sponsored by the noble Baroness, Lady Maddock. She can be proud of the fact that this Act has made a difference, despite some criticisms that have led to the proposed repeal. Therefore, it will come as no surprise that we support the principles underpinning the Green Deal initiative. Indeed, the essence of the scheme is the same as Labour’s pay-as-you-save proposals.

Customers will be able to get up-front money for energy efficiency measures in the form of a loan. The loan is attached to the property and paid back through the energy bill and not the individual. This means that when a person moves, the Green Deal payments do not follow them but stay with the property and are picked up by the next bill payer. It is suggested that the loan amount under the scheme would be up to £6,500. A key part of the proposal is that loans must meet the golden rule, which states that the cost of instalments must not exceed the projected savings on energy bills over the period of time of the finance arrangement. It could be up to 25 years.

Because energy consumers are intended to be the chief beneficiaries and bear the costs and liabilities for repaying Green Deal investments, we need to make sure that any measures are easy to adopt without compromising protection for consumers. We will be asking questions and tabling amendments to provide further protection for consumers. For example, what assurances can the Government give regarding interest rates and will interest be included in the proposed £6,500 cap? How will the Green Deal scheme sit with tenancy law?

We will look at amendments that require clearer disclosure and consent requirements for the benefit of the initial bill payer where the bill payer and the improver are different persons. At the moment, the Bill leaves too much up in the air in this area. The law needs to be clearer about what consumer protections are available and not left to the discretion of individual Ministers who may or may not decide to draft regulations.

The Green Deal proposals need to be seen alongside the Government's proposals in the Public Bodies Bill. As noble Lords may be aware, the Government intend to disband Consumer Focus, the energy consumer watchdog, and move the consumer enforcement functions of the Office of Fair Trading to trading standards. By doing this, the Government are weakening consumer rights to effective advocacy while putting more power in the hands of energy companies.

We support the aims of the Bill but, as mentioned earlier, it is lacking in detail. To this end, we hope that the Minister will be providing sufficient detail in Committee so that the House is able to take a view on how the Green Deal will actually work. For our part, we will spend the necessary time in Committee ensuring that the legislative scheme is well thought through, with the detail possibly becoming part of primary legislation. As I have already expressed, we will want to see consumer protection built into the Bill.

Good-quality consumer information is essential. The results from a recent Ofgem survey show that 70 per cent of energy customers find the number of energy tariffs on offer confusing, and over half of customers are not sure of the potential savings if they switch. On the other hand, independent research suggests that 70 per cent of consumers provided with energy efficiency advice take action as a result. At the moment, the Bill creates a system that relies on multiple lists: a list of approved Green Deal assessors; a list of measures that qualify for Green Deal funding; a list of approved products, such as specified types of double glazing and insulation that can be used in the home; a list of approved lenders; and a list of energy companies that will collect the Green Deal repayment. It is that time of year for this.

At this stage, we are not convinced that this process will be simple for consumers to follow, and we will continue to look at the scheme in detail to ensure that it is easily understood. If the Green Deal does not address consumer confidence, it will not work. This is in no one’s interests. We want it to work, and we will seek to amend the Bill to ensure this happens.

On a related point, we are concerned that this Bill does not provide adequate protection for those in the greatest fuel poverty. Labour’s Warm Front scheme insulated 2 million homes and provided assistance to many more people living in fuel poverty in private sector housing. The Government have announced their intention to phase out Warm Front funding, but there is likely to be a significant gap between the commencement of this Bill and the loss of Warm Front. The money has already run out and there is a waiting list. Warm Front is not just about home improvements but about the bigger question of improving the health of the nation, thus preventing real costs for the NHS and providing real savings. We will be questioning the Government about their intentions to relieve fuel poverty in the interim during one of the coldest winters. Let us remember we had already had snow in November this year, with a forecast that the situation is set to continue.

The Green Deal should work in tandem with the renewable heat initiative, which should help to lower the threshold requirements of positive savings and possibly provide encouragement for further energy efficiency measures above the least costly. To encourage ambitions towards the greatest energy efficiencies through implementing some of the more expensive energy efficiency measures, RHI income could be essential, leading to a reduction in the capital and running costs of any renewable heat installation, as less capacity is required. It would be a win-win situation.

On renewable electricity generating equipment, it is compelling to encourage householders to think of improving the energy efficiency performance of their homes at every opportunity. If the feed-in tariff engages their interest, it would be a wasted opportunity not to have the two policies working together, with once again the income stream assisting with the funding of efficiency measures. Further, if the generating equipment provides excess electricity above the needs of the property, any excess capacity can be exported to the grid. The inclusion of feed-in tariffs and renewable heat incentive technology may allow the golden rule of the Green Deal to work at more ambitious levels. Home owners who are not connected to the gas grid stand to benefit the most from installing renewable heat technologies since they will be protected from volatility in the price of fuel oil.

Among aspects in the administrative regime for energy supply companies, it is critical that the Government should provide certainty so that they can operate with confidence based on the assurance that consistency will be maintained. The electricity market reform consultation launched last Thursday, 16 December, is a critical component if companies are to invest to fill the energy gap. Can the Minister give reassurances today that the playing field will not be subject to constant realignments?

The Bill also provides an excellent opportunity to provide investment certainty in the power section by introducing an enabling power to introduce an emissions performance standard, with a requirement to act within a certain timeframe. Although it is not part of this Bill—yet already promised—we may need to look at this issue in Committee to reduce the delay.

Also not included in the Bill are any provisions in regard to deep geothermal. The Conservative-led Government have cut the previous Administration’s provisions for this and the remaining funding is now cut in half, leaving the industry on the sidelines here while it takes off across Europe. The industry needs licensing exploration legislation. Can the Minister give any indication today regarding the timing of any future energy Bill which could provide for this?

In conclusion, we on these Benches offer support to the Bill and will endeavour to provide constructive suggestions to improve the workings of this legislation. We wish it to be as effective as possible, as we look forward to taking the Minister’s place in the not-too-distant future during these unusually turbulent times. Happy Christmas, my Lords.