Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010

Lord Jenkin of Roding Excerpts

Monday 26th July 2010 Grand Committee

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

My Lords, the carbon emissions reduction target, known as CERT, requires the larger energy supply companies to meet household carbon emissions reduction targets. The amending order before the Committee will extend the supplier obligation policy framework to December 2012 and significantly refocus it over that period. It will act to drive investment and secure jobs in energy efficient industries, ensure that households and the UK more broadly save energy and money, and reduce carbon emissions.

Before I turn to the detail of the order, let me remind noble Lords of the critical role I believe energy efficiency has as part of the transformation to a low- carbon society. UK households spend £20 billion on energy each year, mostly on electricity and gas, and account for 30 per cent of all the energy consumed in the UK, thus directly contributing to climate change the energy used to heat our homes. Energy saving measures are therefore a win-win. They help to increase our energy security by reducing our reliance on imported fossil fuels, they provide environmental benefits by delivering carbon emissions reductions and local air quality improvements, and they support fairness by providing hard-pressed families with a simple means of saving money and protecting against cold, inefficient homes. They provide further economic benefits by creating employment opportunities in the manufacturing and service delivery of energy-efficient technology.

The UK’s housing stock retains substantial opportunities to improve its thermal efficiency. That is why we are putting in place our radical and ambitious green deal, to be established through legislation in the forthcoming Energy Security and Green Economy Bill. The green deal will be a game changer. It will take a long-term approach to energy efficiency, unlocking capital investment and transforming the landscape for home energy efficiency improvements. However, it is imperative that we maintain and, where possible, quicken the pace of energy efficiency investment and activity immediately while we develop and implement the longer-term green deal.

I know that there is a good deal of consensus around the importance of the issues that the order addresses, and I welcome that fact. The refocused and extended CERT will set suppliers a new, challenging carbon emissions reduction target, will focus the scheme on driving insulation measures and will help low-income households get an improved share of investments. It will act as an important bridge to the future, building momentum as we put in place the arrangements for the green deal.

I turn to the specific amendments that we are making with the order. In doing so, I thank those people and bodies who responded to the public consultation process across the spectrum of interested partners, including energy suppliers, the insulation industry and local authorities as well as environmental and fuel-poverty groups. Their contributions have been crucial in forming our decisions.

We will extend CERT to the end of 2012, increasing the target by 108 million lifetime tonnes of CO₂ and setting a new overall target of 293 million lifetime tonnes of CO₂. This increase equates to just over a 3 per cent cut in household greenhouse gas emissions in 2013. Given how far advanced suppliers are in meeting their existing targets, we will allow suppliers to start work against this new target immediately to ensure that customers’ access to energy efficiency measures is not interrupted.

We will act to stamp out the mistakes of the past by introducing a complete ban on the subsidy of halogen and compact fluorescent lamps, and will focus instead on installed measures. Through this order, we will require over two-thirds of the increase in the overall target to be delivered through professionally installed loft, cavity wall and solid wall insulation. This will provide the insulation industry with confidence to invest and will ensure that all customers who want to make a real difference to their energy bills and carbon footprint have cost-effective opportunities to do so. That means help for some 3.5 million households from insulation measures.

To ensure an equitable distribution of measures, and in the light of the rising blight of fuel poverty, we are creating a new obligation for those households that have the greatest need. Low-income pensioners, families with children and the disabled will form a super priority group. Further, each benefiting household will be required to receive a heating or insulation measure. That means an estimated 600,000 such measures professionally installed in the most vulnerable homes, and over £400 million focused on helping the very poorest. Additionally, we will provide vulnerable households with continued support for microgeneration measures under CERT, such as heat pumps and solar water heating.

Our building block for targeting these vulnerable households is the energy rebate scheme, now aimed at a subset of pension credit claimants. We expect up to 250,000 pensioners on low income to receive a rebate worth £80, meaning up to £20 million under this scheme. These vulnerable households can go on to be targeted with supplier offers under CERT.

Overall, the CERT extension will have a significant positive impact on fuel poverty, with approximately 175,000 households expected to be provided with measures that provide them with a long-term solution to fuel poverty. Many more households will receive measures that will protect them from falling into fuel poverty.

In summary, the reshaping of the scheme that this order represents will help deliver a step change in insulation rollout and maximise the scheme’s contribution to environmental and social ambitions. I call on your Lordships to support this legislation in order to bring new impetus to the household energy efficiency agenda with immediate effect and ensure that we can best serve the interests of the economy and the public. I commend the order to the Committee.

[Lord Jenkin of Roding]

My Lords, I welcome what my noble friend said. He explained briefly the reason for the urgency of the measure; that point has been made to me by some of the interested parties. They desperately need to know where they stand at the end of the existing second phase of the CERT programme. As my noble friend said, the order provides a continuation up to the end of 2012.

However, perhaps my noble friend will comment on one of the consequences of the urgency with which the Government have brought forward the measure. I have in front of me the Merits Committee’s report. Under the heading, “Other instruments of interest”, it refers to this order. The paragraph ends:

“However, given the speed with which the Government wishes this SI to proceed, the Committee has not had the opportunity to make any detailed assessment of the instrument”.

I say with kindness to my noble friend that that requires some explanation. It is not satisfactory that this House should have a Merits Committee, which examines matters in the field of statutory instruments which are of interest, but which is precluded simply for shortage of time from being able to offer its comments.

We will have to do the best that we can. The report was published only last Thursday, on 22 July. It has been quite difficult to keep up with what has been going on. Obviously, I will have to do my best. There has been very little opportunity to consult with those outside, but it is a very complicated issue—not so much the changes that my noble friend has outlined, which are themselves quite complex, but the documents that accompany the order are very large. We have had the summary of consultation responses and the government response, a document running to no fewer than 50 pages, and the impact assessment, which runs to 77 pages. Like other noble Lords who have been faced with those documents at short notice, my questions to the Minister may seem naive and ill informed, but I shall have to do my best.

I found it a depressing experience to read the order, the consultation document and the impact assessment with which we have been supplied. That is not because the CERT scheme is undesirable; when we have debated the order’s predecessors, I have made the point firmly that the need to attack and deal with the poor quality of much of our existing housing stock is of huge importance, both to make life a bit more comfortable for the inhabitants and, as the Minister rightly pointed out, to achieve higher energy efficiency. What depresses me is its extremely complicated and bureaucratic method of achieving that.

I have had occasion to criticise that in the past and, although I have the copies of Hansard here, I promise noble Lords that I will not repeat what I have said on previous occasions. If anyone doubts whether it is bureaucratic and complex, just skim through the 77 pages of the impact assessment. That must have required a huge number of man hours to prepare for publication. One really has to wonder whether all that is necessary. I shall return to that point towards the end of my remarks.

In the mean time, I have a few more detailed questions to address to my noble friend. I turn at once to the major change in the order—the new super priority group. I can well understand the aim and have a good deal of sympathy with it. I should declare an interest: I am a member of the priority group. As such, I was able to get my house insulated—both loft and cavity wall insulation. I shall not repeat the horrors of that experience, but it filled me with a strong impression that the biggest single barrier we face is household hassle.

Under the priority group, 40 per cent of the carbon savings must come from people who enjoy a range of benefits or are pensioners aged over 70. The noble Lord, Lord Hunt of Kings Heath, will recognise that we have frequently had to complain about the difficulty for the suppliers who have to operate the scheme identifying the households that qualify for that treatment. I dealt with that two years ago under the 2008 order and again last year under the 2009 order. One concession was made by the Minister's predecessors. Under the Pensions Act, we had an order which allowed information to be shared on what was a very limited category of those in the priority group—namely, pension credit beneficiaries. No doubt that has been helpful. The data protection rules make it impossible for there to be a general exchange of names and addresses of people who fall within the various categories of beneficiary under the social security legislation.

Therefore, the companies which have to operate the scheme are reduced to other methods to try to find the people in the priority group, including cold calling and, much more intelligently, looking at areas and cities where they might expect to find a higher concentration of people in receipt of the various benefits. The point was made to me again this morning that that is a very unsatisfactory process which costs them a lot of money. It increases the cost of administering the whole scheme.

In the order, we are now faced with a new category, the super priority group. If anyone is any doubt about that, paragraph 3.2 of the order spells out the definition of those who are in the super priority group. It is nearly a full page long. Does my noble friend have a better answer than did his predecessors as to how on earth the companies are supposed to find out who those people are, so that they can approach them and, if they agree, insulate the houses in the way we all want?

I turn to the consultation. I will not weary noble Lords with the detail, but at paragraph 8.4 of the results of the consultation, there were many conflicting answers on how that problem should be tackled. I do not see any advance in the order on what has gone before. That is my first question.

My second question relates to the concept of market transformation measures. Again, there is an elaborate definition of that in subparagraph (4) of paragraph 3. Paragraph 7.4 of the Explanatory Memorandum spells that out in some detail. The second point in that paragraph states:

“CERT supports innovation and energy saving products and appliances”—

which my noble friend very properly mentioned in his speech—

“by providing a 50% increase in carbon score to qualifying products. The market transformation baseline”,

is set out in the 2001 order, thus going back some years.

“This means that a measure which saves carbon but was not promoted under the 2001 Order can be promoted as a market transformation action under the CERT order. However, we will increase the baseline to measures which have not been promoted under the …Order 2004. This will mean that suppliers need to come forward with new products or similar products which are no less than 20% more efficient than products promoted under the previous scheme to March 2008”.

I have hunted through the order, I hope with care, but I cannot find where the figure of 20 per cent comes from, so I would be most grateful if my noble friend could explain where in the order is the uplift, as it were, of 20 per cent which needs to be met. It is set out in the Explanatory Memorandum but I am quite unable to find it in the order.

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The noble Lord, Lord Jenkin, raised the point made in the Explanatory Memorandum about costs to consumers being reasonable. I hope that the Minister will say more about costs. I have debated these matters with the noble Lord, Lord Reay, over 20 months. I fully agree with him about information. It will be interesting, when the energy Bill comes, to see what progress can be made. I am sure that we disagree about the general measures taken by the previous Government to move towards a low-carbon energy structure, and the undoubted costs that that will cause to consumers. The previous Government and I always took the view—we would always pray in aid the Stern analysis—that it was better to go for it now than to delay, and that it would be more cost-effective to take measures now rather than wait for catastrophe to hit us. However, it is also right that the public should be aware of the implications and costs of policies. In that way, we are more likely to get consumer ownership.

[Lord Jenkin of Roding]

I do not know when we will have an opportunity to come back to this: perhaps tomorrow or Wednesday. I am sure that the Minister wants to get his order through before the Summer Recess. The noble Lord, Lord Hunt, raised the issue of whether the figures should appear on bills. He would do well to remind himself of what he said when I moved similar amendments in the past that were rejected by the then Government.

I had thought that we would have this. It was in my honourable friend Mr Hendry’s speeches on many occasions; but we will have to wait and see. The noble Lord, Lord Hunt, is being a little disingenuous. He, in fact, has turned this down in the past.

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[Lord Marland]

My Lords, as always, it is a great pleasure to enter into a debate with such eminent gentlemen who know so much about the subject. Perhaps I may deal with the points raised in consecutive order. I note the comments of the noble Lords, Lord Jenkin and Lord Hunt, that this order should have gone through the Merits Committee. You’re damned if you do and you’re damned if you don’t. It is worth pointing out that the Joint Committee of both Houses that scrutinises statutory instruments did not think that it needed drawing to the special attention of both Houses. This legislation is in operation and all we are doing is seeking to extend its lifetime. We have had three months of public consultation; some 102 companies have been consulted, as have the big six and their agencies. The whole point here is to keep up the pressure on an existing programme to build the bridge between now and the green deal.

This programme is being filled quickly—probably quicker than we predicted—and we now have an opportunity to keep up the pressure. It would be wholly wrong to tear up the current programme while it is in force and particularly while we are planning the green deal to which the noble Lord, Lord Jenkin, referred. We completely understand the bureaucratic and complex nature of the current arrangements, and I give the noble Lord the commitment that the green deal will seek to address that. As regards his point on difficulty of suppliers, that is a practical issue. Some people have no difficulty with them, while others do. We hear positive remarks and I am sorry that he experienced difficulty. Perhaps if he joins the super priority pension group, it might be a different thing altogether.

[Lord Jenkin of Roding]

My Lords, I am tempted to regard myself as being very poor, but I am not as poor as that.

[Lord Marland]

We are deeply gratified to hear that. Of course, it is easy to data-share under the Pensions Act 2008 as it commits to providing data. I am afraid therefore that I do not agree that it is difficult to find out who the relevant people are. Any work with local charity groups and local authorities adds to the information flow. This is not therefore a change; it is an extension of a policy. It gives us time rightly to re-examine his points about bureaucracy and difficulty of commitment.

As regards cost, raised by a number of noble Lords, it is £50 to customers. It is an increase from £41. However, against an average bill of £1,124, it is a worthwhile commitment to the cause. Climate change is not the main driver—this is reducing carbon throughout the supply and we must differentiate between the two. The noble Lord, Lord Jenkin, rightly mentioned the Hartwell report—not for the first time. We have three days of debate coming up. I will lay a private bet that it will be mentioned every day and I look forward to the noble Lord doing so. I believe that the writers of the Hartwell report will see the green deal as an opportunity for their recommendations to be examined. It will give us the opportunity to take their views into account.

The noble Lord asked where legislation states that market transformation requires a 20 per cent improvement on existing products. I repeat that to him as said because it is important that we understand it. I will give him the officials’ response, which is that the CERT legislation details that uplifts will be applied if a significant improvement in efficiency is achieved to previously promoted measures. Ofgem, the scheme’s regulator, has indicated that a 20 per cent improvement is the minimum requirement. Ofgem consulted with suppliers and other interested parties before providing this figure.

My noble friend Lord Reay asked about priority groups and super priority groups and how they are going to be funded. I confirm to him that they will 100 per cent generally be funded. He asked questions about how carbon savings are assessed, especially comfort-taking. Comfort-taking is considered in the impact assessment calculation for the carbon savings, and if he would like more information on that, I would be happy to invite him to discuss it with our officials later.