Lord Lawson of Blaby
Main Page: Lord Lawson of Blaby (Conservative - Life peer)Energy: Climate Change
Lord Lawson of Blaby Excerpts
Lord Whitty
My Lords, I, too, am all in favour of Anglo-French co-operation and I should like to see some on the climate change agenda, so perhaps we can revert to that. I should be grateful for the break in the debate, otherwise I might have been tempted to respond in detail to the tour de force by the noble Lord, Lord Lawson, and the last time I did that I got completely slaughtered. However, the House should recognise that the difference between the noble Lord and most of us here is that he does not accept, even with the usual caveats, the burden of evidence of man’s contribution to global warming. I do and I am glad to say that the Government do. I therefore thank the noble Lord, Lord Lawson, for differentiating himself so clearly from the Government and I congratulate the Government on differentiating themselves so clearly from the noble Lord on this matter.
Lord Lawson of Blaby
I accept that there is a possibility and a probability that manmade carbon dioxide emissions have had some impact on the very slight rise in the temperature in the 20th century. I do not deny that. I keep an open mind on the science. Even if that is accepted, the policy decisions do not follow; they do not add up. That was my point.
Lord Whitty
I thank the noble Lord for that clarification. Behind his scepticism about the policy, however, there is a doubt about the science. The noble Lord often makes good political and economic points but essentially his assessment of the science and the challenge that the science presents us with is different from the view taken by both the previous Government and this one.
Despite the climate sceptics’ view, there is largely cross-party consensus on the importance of climate change and the present Government’s commitment on the road to 2050 via 2020. There is largely consensus that we need a mix of energy sources from nuclear to renewables, which means nuclear and renewables, not nuclear or renewables. That is a positive sign for this country at a time when, as has been said, there is a danger that in the United States a political veto will shortly be handed to the climate change deniers and when China insists on playing such a dangerous geopolitical game on this most serious of subjects. As a result, any progress at Cancun is seriously in doubt. The fact that I am on the same page as the Government on this does not necessarily mean that I agree with everything that they are attempting to do.
Before getting on to that, I should probably declare a few interests. I am the chair—shortly to retire—of Consumer Focus, which, along with our predecessor organisation Energywatch, has often expressed consumer interests in energy policy. Even a few weeks ago, we managed to gain for consumers about £70 million from one of the major energy companies, only to find out two weeks later that we were about to be abolished. It is important that the consumer interest in this debate should be reflected. I also declare an interest as honorary president of CHPA and chair of a CHP company. As we will refer to Warm Front in a moment, I should say that I have a past interest as an adviser to Eaga, but that is no longer so. I am a member of the Environment Agency board, which reminds me that some departments did not do quite as well as the noble Lord’s department out of the CSR settlement. Measures to adapt to climate change—principally flood defences—failed to get adequate resources in the outcome of the CSR. The noble Lord and his colleagues in DECC are to be congratulated to an extent.
My main concerns in this debate are threefold. Like the noble Lord, Lord Teverson, I think that the drive on energy efficiency is still insufficient, not just in the household sense but more broadly. Secondly, there is a serious social and distributional dimension about the issue of who pays for the cost of adapting and mitigating climate change. Thirdly, there is not yet any clarity on the Government’s review of the role of Ofgem.
Energy efficiency applies not only to end use but in the generation system. We have some pretty inefficient generators in the distribution system, in which there is major leakage, and, of course, in homes, factories and offices. I was grateful, I think, to see a commitment by the new Government to increase decentralised energy, which helps to bring energy nearer to its point of use, but in general there has not been a lot of emphasis on the totality of the system and on the improvements in energy efficiency that we should be able to see.
At the household end, the Government are committed to the green deal. I welcome the concept of the green deal, but we need a lot more detail. Who will deliver it? How will householders be persuaded to go for it? Are supply companies to be involved in the delivery? Unfortunately, they are not the most trusted by householders and consumers. The banks clearly have to be involved, but I do not think that they should be the major agent either. There has been talk of Tesco and the other major supermarkets delivering. I am not sure whether that is on the Government’s agenda. There could be specialist managers—indeed, the installers and manufacturers of improved energy-efficiency and insulation materials and gadgets could be the actual deliverers.
The key thing to remember is that the whole concept of the green deal is for an individual householder voluntarily to enter into a deal to make some expenditure on the basis of a loan that will be paid back through lower energy bills. That is key, but it requires trust—trust in the initial audit of the energy efficiency or otherwise of the house; trust in the terms of payback; and trust in how the customer service to that householder is carried out, because it can all be spoilt if a wall is unnecessarily knocked down or even if a carpet is messed up and the installer fails to recognise the interests of the consumer in the household.
There is also a lack of clarity about who potentially benefits from the green deal. Owner-occupiers, in one sense, clearly would if they were in the building for a significant time. Theoretically, at least, they could benefit if they sold the building, because the value of the house should at least reflect its future energy consumption bills. It is not so clear when it comes to tenants and landlords. The question of who benefits depends on who pays the bill and it is not at all clear how this will apply in social housing in local government and housing association properties.
That brings me to the nub of the problem so far as the distributional aspects are concerned. There is an increase in fuel poverty. I was once the Minister who set the targets for fuel poverty and for the first few years we made significant progress on that front. We are now miles off achieving those targets and I think that a realistic reassessment of the targets is necessary. However, we must reiterate and back up a commitment to eliminating, so far as possible, fuel poverty from our society. The Government’s major move on this front has been effectively to run down and abolish Warm Front. There was some criticism of Warm Front and no doubt its delivery and scope could have been improved, but it was a major contributor not only to reducing fuel poverty but also to improving the energy efficiency of some of our least energy-efficient buildings. It is not replaced by the green deal. It is not clear how the green deal applies to those who are fuel poor and would not wish to take out that loan or do not own the property in which they live. Nor is it replaced by the price support system that the Government say will operate within the tariff structure—in other words, there will in effect be some subsidy to the supply companies, bringing on what we might previously have called a social tariff, although I do not think that that terminology is of interest to the Government. That helps—it helps to lower the current price—but it does nothing to improve the energy efficiency of the building and therefore the future bills.
Fuel poverty is growing. In the medium term, it is almost certain that energy prices will rise. They will rise because of world market conditions and they will rise because of government policy in, effectively, placing the cost of greening and decarbonising our energy supply on the consumer. On one level, I do not dissent from that policy, but it has consequences. In particular, it has distributional consequences on the very poor. It is not clear whether the green deal will do anything significant on that front.
The central problem is that this is a regulated industry—a very heavily regulated industry, according to some—and the net effect of the regulation is counterproductive. I would be interested to hear from the Minister what the Government expect from the current review of Ofgem. I have often been critical of Ofgem. The noble Lord, Lord Mogg, who is not in his place, sometimes gets very sensitive about it. However, I am not in favour of the abolition of Ofgem, nor am I in favour of limiting its remit. It has been improving on both the social and the environmental fronts. However, there needs to be a radical if not revolutionary approach to the way in which tariffs are structured in this country. It remains the case that the more energy you use, the lower the unit cost of energy. It also remains the case, either because of the tariff or because of the way in which you pay, that, by and large, poorer households pay more per unit of energy than better-off households. Both on social and environmental grounds, that is counterproductive.
The objectives of energy policy—on security, decarbonisation and affordability, including reducing fuel poverty—must depend on us delivering a step increase in energy efficiency. Unless the Government and Ofgem and the remit that this Government give to Ofgem are directed at producing a tariff structure that encourages energy conservation and energy efficiency and removes the disproportionate burden of energy costs on the poorer households in our society, we will not achieve any of those objectives. I hope that, in the review of Ofgem, the Government will bear in mind that the combination of the noble Lord’s department and Ofgem can deliver a radical change of strategy for us. I hope that they do deliver it.
Lord O'Neill of Clackmannan
My Lords, we seem to have reached the point in this debate where everything that could be said has been said but not everyone who could say it has already said it, so I am going to offer a few more points.
There are always three guiding rules in energy policy: first, security of supply; secondly, affordability; and, thirdly, environmental sustainability. It is significant that the last of these three has assumed the almost overarching significance that it currently enjoys. However, it would be wrong to suggest that this is something of a novelty. In the past, we have had clean air Acts and the fiscal triumph of taking lead out of petrol, which was achieved by the Labour Government in the late 1970s, when Denis Healey—the noble Lord, Lord Healey—imposed taxes to make it inconvenient and expensive to have lead—
Lord O'Neill of Clackmannan
I think that it was started by Denis Healey, as well as by the noble Lord. That of course gives some credibility, at least in part, to the environmental credentials of the noble Lord, Lord Lawson, although some of the points that he made earlier today might draw that comment into question. However, we will move on from there.
Certainly, British Gas’s great programme of changing from town gas to North Sea gas and linking up all the households was in some ways far more ambitious than the metering programmes that we have been talking about this afternoon. Opportunities have consistently been taken by Governments, state enterprises and others to take account of opportunities, some of them environmental. However, now we do not have the luxury of taking advantage of opportunities, and I think that we are required to be socially and environmentally responsible in taking account of changes in our climatic conditions.
It is certainly true that in the past we have been rather complacent in the UK. Nye Bevan once said that Britain was self-sufficient because it was an island built on coal and surrounded by fish. The common fisheries policy put an end to one, and the other was the demise of the coal-mining industry—for reasons that we do not need to go into tonight, but some of us still carry the scars from personal and constituency experiences. The coal industry in the UK is not currently in a position to re-emerge. It may at some stage if new technologies are properly developed to take advantage of the stocks that remain, but we are dependent on coal imports and at the moment the prices are relatively reasonable. However, by 2015 we will have to confront the large plant directive requirements and put to one side a number of the coal-fired stations. Alternatively, if we keep them going, we will do so at considerable expense because of the charges that will be imposed.
Certainly, our oil and gas supplies from the North Sea, which are often forgotten, will continue to make a sizeable contribution. They will not so much add to self-sufficiency but they will put us in a relatively better position than a number of the countries, particularly on the continent, that we hold up, sometimes unrealistically, as the whited sepulchres of renewables and the like. They had to go for renewables in the way that the French had to go for nuclear in the 1970s when they realised that they were going to be dependent on neighbours on whom they could not always depend for oil and gas. At the end of the Cold War, Germany had the industrial imperative to find something to fill that gap in its economy, which had been filled hitherto by the need to defend the country and to service the troops.
Therefore, while to an extent the UK can be accused of a degree of complacency, I think it is fair to say that, at least in part, our exploitation of our North Sea oil resources, perhaps rather foolishly in the late 1980s and early 1990s when we had the dash for gas, was understandable. However, we have to take account of the fact that we will not have as much oil and gas as we had before and that it will be difficult for us to secure those commodities in the world market in the way that we have been able to do in the recent past. The jury must still be out on the optimism of some people in relation to the significance of the Shell reserves and whether they will be exploited, and with regard to the attitudes of some of the countries that have them.
Certainly it is fair to say that we need to address the issue of gas storage in the UK. In his commendably short speech the Minister referred to the fact that permissions have been granted for new exploration, usually in areas of the North Sea that are a bit less hospitable. We have gone for the low-hanging fruit. It will be more expensive and more difficult, and it may not necessarily give us what we want. Equally, we have to recognise that while we do not need the 90-day supply that the Federal Republic might require in terms of gas storage, we need more than we have at present. We are getting to the stage where the Government have to make a choice. Will they stick with a market-driven solution or will they try to set a target for the amount of storage facilities that we require? Frankly, the market cannot be left to work this out on its own and I do not think that Ofgem has done us a great deal of good in that area. It has not been sufficiently robust or rigorous in its thinking. The Minister could come back to us on that in his reply.
I speak as the chair of the Nuclear Industry Association and I welcome the Government’s commitment to the programme of replacement build. I realise that there are some problems and we will have to agree to disagree at this stage on the uncertainties of the planning regime. There are some questions about the national policy statement but that will be for another day when we can have a detailed debate. I am a little disappointed that at present at least two of the 10 stations have been put into the long grass. I realise that there were problems. It was a greenfield site and there were planning considerations, but there could have been a bit more boldness on the Government’s part in relation to these two stations, which were relatively short distances from one of the hubs of the north-west nuclear industry at Sellafield.
At the weekend at the Scottish Labour Party conference, Iain Gray MSP, leader of the Scottish Labour Party, who may well be the First Minister after the next election in May, made it perfectly clear that he wanted Scotland to continue to generate nuclear power in the foreseeable future. Will the Minister talk to his coalition colleagues in the Scottish Office and tell them that there are sites at Hunterston and Torness which should be considered? I am not arguing for both of them as we could probably have too much nuclear power in Scotland, but if both of them close we will not have enough. Certainly, the optimistic noises that come out of the Scottish Government relating to renewables are fanciful, to say the least. We know that there are tremendous opportunities for wind, provided that we can secure planning permission and provided that we can get the infrastructure and supply chains organised to get into the North Sea. I do not think that they have been properly addressed or studied with the rigour that such challenges will require. Nevertheless, they are important, and tidal power could be as well. The idea that Scotland could somehow provide 80 per cent of its energy requirements from what are at best maturing technologies is fanciful.
At the same time, I recognise the contribution that Longannet, for which I have a great affection, has made. It was the power station to which the miners in my constituency delivered the coal 24 hours a day, just about 365 days a year. It has been the powerhouse of Scottish electricity generation—2,400 megawatts. It is a massive station which at the moment has flue gas desulphurisation equipment installed. That was very important when we were dealing with acid rain considerations, as we were 20 years ago. That reduced the thermal efficiency and output of the station. We have to remember that, whatever form of carbon abatement or carbon capture and storage kit that we install, it will be expensive and reduce the efficiency of the station. Therefore, it will make the electricity coming out of that station ever more expensive. It will have fairly long payback times as well. We have to be a wee bit cautious when we look at the economics of CCS. The consensus is that this technology will become available around 2020 or 2022. That is perhaps only one of the forms because of the way in which the Government have structured the competition. I am a little cautious about the CCS option there.
Anything that involves massive capital expenditure in utilities requires a stable regulatory framework. As yet I do not think that investors have confidence that the Government have it right—they have not got it right because they have said very little. I know that in future we will get it but, for the investment to be achieved at the scale we want, we will need to get a degree of investor confidence that will come only from clear regulatory intentions that will give us the stability for peace of mind.
I realise that I am almost out of time but I want to make one last point as a national office bearer of fuel poverty charities. At present, we see that £80 is accounted for in every domestic bill by subsidies to renewables. That is imposed in a rough and ready fashion and it is not fair to disadvantaged households. The Government need to look again at the question of social tariffs and how they will be provided in future. Equally, when we consider the green deal, as we will when the legislation is introduced, the devil will be in the detail. A lot of reassurance needs to be given and the Government have gone part of the way by announcing that they will be rigorous in their approach to private landlords in the implementation of certain aspects of this policy. The Australian experience is helpful in indicating what not to do. There is a lot of worry and anxiety among the fuel poverty lobbies and the most disadvantaged about what will happen to their fuel bills. They think, with some justification, that it is not fair that they should have to pay a disproportionate price for the recognition that we all have to accept of climate change and the need for carbon abatement.