Energy Bill [HL]

Lord Marland Excerpts

Wednesday 22nd December 2010 Lords Chamber

Moved by

[Lord Marland]

That the Bill be read a second time.

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

My Lords, this Bill will bring energy efficiency into our buildings through the Green Deal, enhance our energy security and encourage investment in the next generation of low-carbon energy. The Bill also proposes to take powers to require the cheapest tariff information on energy bills, to create a new energy company obligation to reduce carbon emissions and to introduce new energy security measures to make sure that sufficient gas is available during an emergency and allow us to monitor the adequacy of our electricity supply.

Some provisions in the Bill extend to Scotland, Wales and Northern Ireland. We have worked closely with the Scottish, Welsh and Northern Ireland Governments in drafting the Bill, and we will continue to work closely with them on implementation by, for example, consulting devolved Ministers on secondary legislation so that we can get delivery across the UK.

The Energy Bill is only part of the picture. The consultation on electricity market reform published last week looks at carbon price support, feed-in tariffs, capacity payments and an emissions performance standard. The market reform will not only give us a stable and predictable market but put us on track to decarbonising the economy.

We need to improve energy efficiency and to reduce carbon emissions from existing buildings as well as build energy-efficient new ones. The Green Deal’s financial framework will let people install energy-saving measures to be paid for in instalments via energy bills. This is not a loan, so no individual is at risk of the lender calling in the whole amount. The meter is attached to the property and will stay with the property when the inhabitants change. There will be a golden rule that the instalment payment for the energy-saving measures should not be more than the expected cost savings on an average bill for the duration of the arrangement. Those costs can be spread over 25 years. The Bill also puts in place mechanisms to ensure the proper accreditation of measures and their installation and it will ensure wider protection for the consumer to guard against, for example, mis-selling.

The Green Deal offers the private rented sector a real incentive for both landlords and tenants alike. For example, the residential private rented sector has the largest proportion of band G properties of all tenures. In the non-residential sector, just over 60 per cent of properties are rented. Just under 18 per cent of registered non-residential buildings have an EPC rating of between F and G. Landlords will have no upfront capital costs to pay for their improvements. Tenants will repay the costs through their energy bill savings while enjoying lower bills.

After the Green Deal has been running for a year, there will be a review. If landlords as a whole do not take advantage of the Green Deal, we will not hesitate to enforce it through legislation. The Bill will give us powers to make landlords honour requests from their tenants to make their home energy-efficient where there is finance available through the Green Deal or the ECO. In addition, the worst-performing properties might be targeted through local authority-led action if the review confirms the need.

Complementing the Green Deal, we plan to replace the existing energy company obligations—the carbon emissions reduction target, CERT, and the community energy saving programme, CESP—with a new energy company obligation focusing on driving carbon savings and helping vulnerable energy households. When CESP and CERT expire at the end of 2012, a simpler ECO will work alongside the Green Deal to ensure that the Green Deal works for vulnerable people and supports heating improvements. The Green Deal will also support anyone in hard-to-treat housing.

Pensioner households benefit from a wide range of benefits, including the winter fuel payment of £250 for those up to 79 years old or £400 for those aged 80 or over. The cold weather payment of £25 per week is paid to vulnerable low-income households when the weather is really cold. In addition, we have announced the warm home discount to provide further support for the vulnerable.

The Green Deal will help reduce energy bills for the long term and make our houses more energy-efficient, but there is a wider issue of energy security. Fossil fuels are not infinitely available. Supply diversity and resilience are, of course, critical. Look at the past four winters, including the current one. We have 40 per cent of Europe’s wind energy and 11,000 kilometres of coastline at our disposal, but to reap those benefits we must connect wind turbines directly to the grid. The Bill proposes to amend provisions in the Energy Act 2004 and the Electricity Act 1989 to let us do that. The Bill will also help encourage new entrants to this sector and stimulate competition, innovation and the supply chain.

The Bill will also improve our security of gas supply by enabling Ofgem to strengthen commercial incentives on gas market participants to meet their contractual supply obligations during a gas supply emergency. In turn, this will sharpen incentives to avoid a gas supply emergency in the first place and help underpin commercial demand for additional gas supply infrastructure, for gas storage and import facilities and for long-term contracts. Our security is enhanced by using a mix of energy sources, so the Bill will cut the chances of external factors affecting our gas supply.

The Bill will also introduce a special administration regime for gas and electricity supply companies similar to that already in place for network and distribution companies. If, for example, a major supplier becomes insolvent, this Bill will ensure that customers continue to be supplied with gas and electricity as cost-effectively as possible until the company in difficulty is rescued or sold or its customers are transferred to other suppliers. This will reduce the risk of financial failure spreading across the energy market, maintain market stability and protect consumers.

To conclude, this Bill will bring energy efficiency to homes and businesses across the UK. For too long now, energy efficiency has been on the back burner, but it will now be at the forefront. The Bill will help protect the most vulnerable from fuel poverty and, importantly, bolster our security of supply. I look forward to hearing noble Lords’ advice and comments. I beg to move.

--- Later in debate ---

[Lord Marland]

My Lords, I thank all noble Lords for a wide-ranging debate and some very thought-provoking and some not quite so thought-provoking but none the less invaluable advice and comments. I will not go beyond the scope of the Bill, even though some of the advice and comments did, because this is a debate on the Energy Bill. I will therefore restrict my responses to that matter. We have had plenty of opportunity to debate in the past and will no doubt have plenty in the future and I am happy that we will debate the other issues that have been raised then.

For the purposes of this summing up, I will clarify that this is a framework Bill on which there is a lot of work to be done. I very much value the comments made by noble Lords. We have created the opportunity, which I am told is groundbreaking in this House, to hold breakfasts and discussions with noble Lords, to listen their views and to improve on them, and I shall continue to create those opportunities as the Bill progresses. That the Bill starts here is a good opportunity for us all to get it right, and to do so within the spirit of the Bill. I shall therefore deal with some of the broader issues that have been raised by noble Lords, take some of them together and refer to individual ones later. There have been, as noble Lords are aware, an awful lot of questions. In Committee, I shall pick up on those questions that have not been commented on, or I am very happy to correspond or discuss further with noble Lords.

The noble Lord, Lord Grantchester, raised the subject of consumer protection, as did the noble Lord, Lord Teverson, and others. It is fundamental that the consumer is protected in this whole endeavour. There are two risk areas—accreditation and assessment—and the best practices must be established.

[Lord Lea of Crondall]

The Minister said that he would discuss some broader points, but he is now on the narrower Bill points again. On this occasion, it is not acceptable—certainly to me—for him to say that he is just going to stick to the Bill when last week it was overtaken by events. The hugely important, historic announcements about electricity price restructuring and the carbon floor are relevant to this Bill; that is what we have all been talking about. It is an absurd use of parliamentary procedure to say, “My job is to get the Bill through. I don’t want to hear about anything else”. But that seems to be the Minister’s approach. There might be Front Bench agreement on this all being a love affair, but it is a greatly missed opportunity. I would ask the Minister to think again, to discuss the matter with the Treasury and Chris Huhne and to find out whether it is really sensible, given last week’s announcements, which have hijacked this Bill, to go on as if nothing has happened.

[Lord Marland]

Well, thank you for those very unnecessarily hostile remarks. Obviously, the noble Lord has been deaf to anything that I said at the start of this wind-up. I notice that he was one of the few who has not attended any of the opportunities to have briefings or discussions on this document, and chooses to take up our time on this particular issue, which is not relevant to this Bill. If he wishes to discuss things outside the context of this Bill—as I said earlier, and I shall repeat it, if he would not mind listening—he is entitled to do so, and he is entitled to ask for a debate on it himself. As I said earlier, we are perfectly happy to do that.

If I may, I shall go back to the substantive issues on the Bill. A lot of time has been taken up in this House in the past few days, and I think that people want to get on to other things in their life. To say that I have been unnecessary and not listening is a most unfair remark.

As I think I said, consumer protection is at the heart of this. The OFT will be fundamental to ensuring that best practice carries on, and through the Committee stage we shall enjoy noble Lords’ support. I was grateful to the noble Lord, Lord Best, and others in what they said on the rented sector, and the encouraging words coming from the associations that he mentioned. The noble Lord, Lord Teverson, and the noble Earl, Lord Cathcart, and the noble Baroness, Lady Noakes, also referred to that matter. Clearly, we want to encourage the rented sector to embark on this and embrace it with open arms. The noble Lord, Lord Best, suggests that it will do; clearly, if it does not want to utilise the market practices, we will have to review the provisions in 12 months and then we will have to use powers to ensure that it does. Cracking that is one of the most difficult areas of the Green Deal.

The local authorities issue mentioned by the noble Baroness, Lady Maddock, the noble Lord, Lord Teverson, and others, is largely a matter for the Localism Bill, which involves authorities going back to the local authorities and enhanced authorities. It is to their benefit to do something like that. They have a number of incentives to do this through carbon-reducing programmes that they have to adopt through government best practice. That in itself should be an incentive.

Fuel poverty, one of the biggest issues with which the Government currently have to grapple, was raised by the noble Lords, Lord McFall and Lord Lawson, and others. It is a critical issue. Clearly, there are a number of measures. Fuel poverty has exponentially increased year on year since 2004. We must reverse that trend. The Green Deal is part of the attempt to do so, along with all the other measures that I mentioned in my opening speech and, of course, the warm home discount, which will provide £250 million, rising to £310 million by 2015, to encourage people out of fuel poverty. As your Lordships know, we are going to conduct a review of fuel poverty to get into the detail and solve this terrible trend for those in great difficulty.

Incentives were mentioned by a number of noble Lords. There are incentive schemes. This is a free-market programme so the incentives will come from within the market. The noble Baroness, Lady Parminter, will know that councils have the opportunity to incentivise programmes through 60 schemes. We will be looking forward to them doing so.

The noble Baroness, Lady Parminter, also mentioned a level playing field, as did the noble Lord, Lord Grantchester. Through all our energy and endeavours, we are trying to get competitiveness into the market so that we can establish a level playing field. That is fundamental to this programme.

The noble Lord, Lord Jenkin, raised, among other things, Warm Front and how it interacts with the Green Deal. I am delighted to say that Warm Front has been fully subscribed early in the current year with the money that was made available. In 2011-12 £110 million will be available and a further £100 million in 2012-13. During that time, the Green Deal will have fed in and been excellent in its support of the Warm Front which, as I have said many times, was a good attempt at combating fuel poverty but has not worked in itself. We must grapple and deal with that.

The noble Lords, Lord Cathcart and Lord Teverson, talked about their energy bills and the reverse cost thereof. I undertake to review this during this process because it is an extremely good, fundamental point.

On specific points, the noble Lord, Lord Grantchester, said that there was a cap of £6,500. There is no cap. The golden rule will in itself impose a restriction on the amount that the house can utilise. He also asked a reasonable question about interest rates. We obviously have no control over interest rates, but are developing a model and will, through Committee, have developed a model into which we can build interest rates.

I am afraid that noble Lords would not expect me to have an answer on the timeframes of the second Energy Bill. Getting a timeframe for any Bills at the moment seems quite difficult. I thank noble Lords for their support in getting us to where we are today.

[Lord O'Neill of Clackmannan]

The Minister has gone some way to answering our concerns about the cash limits and the amount of money. Can he confirm that boilers can be part of the Green Deal, or are we talking almost exclusively about insulation measures?

[Lord Marland]

The golden rule is that it generates energy efficiency. It is not intended, as I understand it, that boilers are part of that. Boilers were part of Warm Front, so there has been a lot of activity in that regard.

The noble Lord, Lord Grantchester, refers to deep geothermal, as do, unsurprisingly, the noble Lord, Lord Teverson, and others. We are exploring a licensing scheme as we speak. I hope to return to that subject in Committee. It is a very valuable and useful way forward.

The noble Lord, Lord Teverson, raised the issue of water. We will support the reduction of leaking, provided it can be demonstrated that it reduces the energy cost to the household. He mentioned issues relating to the accreditation framework, as did the noble Lord, Lord Grantchester. I think I dealt with several of those but the devil will be in the detail. With their permission, I hope we will go through that quite extensively in Committee.

The noble Baroness, Lady Finlay of Llandaff, offered the very good suggestion of an alarm system, which I will take away and consider as a valuable issue. I am grateful for her support on that.

My noble friend Lord Jenkin of Roding raised several points. First, who pays for the assessment? This is a market-led endeavour. We would expect a lot of it to fall within the promotional incentive of the people who are going to supply it. The most important thing is that the Government support those who are needy and cannot pay for it themselves. That will be done through an ECO or other function. I am glad my noble friend also mentioned EPCs because I have instigated a review of these. I would like to keep my powder dry until the review is finished. However, by the time we go through the Committee stage, we should have had the full review. I will give further details of that as it goes on. EPCs clearly need a great deal of looking at to make sure that they are fit for purpose. Who bears the cost of a consumer default? A consultation process on that is going on at the moment. It may live with the providers of the Green Deal or the energy companies themselves.

I agree with the noble Lord, Lord O’Neill, that we have not had a big initiative on gas storage due to factors I mentioned previously. To slightly embarrassingly blow my own trumpet, I signed the planning permission for a 15 per cent increase in the nation’s gas storage, which had been sitting around waiting for a new Government. We have taken keen action on that, which we need to increase, although it is not our primary concern because we have the most sophisticated terminals in the country for receiving gas. They are also the most flexible, so we can get gas from various supporting operations. Twenty per cent of our supply still comes from a Norwegian network and we still have a diminishing 50 per cent here in the UK.

The noble Lord, Lord McFall, posed the question of how Rupert Soames would like to be remembered. As he is a friend of mine, I feel he would like to be remembered as the CEO of a business that got into the FTSE 100 and generated great employment not only in Scotland but in England. In fine Churchillian tradition, he has achieved a great deal.

We seek to reform planning, which the noble Lord, Lord Hunt, referred to, by bringing more direct control—and therefore quicker decision-making—over such matters as onshore and offshore wind back into the ministerial department so that they can then be dealt with quickly and efficiently.

The noble Baroness, Lady Maddock, referred to HECA, which came from a Bill that she triumphantly took through the Commons in 1995, although she no doubt worked on it for some time before that. HECA was indeed a very good measure that served a great deal of purpose. However, time has moved on dramatically in this area and there has been much consultation on the subject. The consultation carried out in 2007 indicated that a change was very much on the cards. I am grateful for the support of the noble Baroness and for her advice on consulting various people, including ACE. I understand that ACE feels comfortable that our proposals will be a good follow-on to the great work that she carried out, for which we all owe her a great deal.

The noble Lord, Lord Giddens, fed me some interesting stuff. We all learnt about the Jevons paradox—apart from the noble Lord, Lord Lawson, who explained the point to me while sitting beside me, for which I am very grateful—which my officials tell me we take very seriously. However, as I had not heard of the paradox beforehand, noble Lords will not have expected me to know that. We build in a substantial discount for estimated energy savings from energy efficiency in all our impact assessments to account for increased consumption. Nevertheless, significant net savings still occur even with this conservative assumption.

Job creation, new jobs, net jobs and the renaissance of our manufacturing industry, which the noble Lord, Lord Giddens, and the noble Lord, Lord Hunt of Chesterton, raised, are absolutely fundamental. We believe that 100,000 new jobs will be created through the installation industry. That will appeal to the noble Lord, Lord Giddens, as an economist.

[Lord Giddens]

It is important to consider that one is talking about net new jobs. Just talking about creating jobs is not good enough, because the act of creating new jobs often destroys old ones. We must carry out an analysis of that.

[Lord Marland]

I totally agree. New jobs are created by new productivity. Clearly, there is a shortage in the building trade at the moment so I did not say that there would be 100,000 new net jobs. Obviously, if the building industry takes off at the same time as the home installation or Green Deal activity, new net jobs will be created.

However, net new jobs will be created by the £60 million of technological support that we are giving to the offshore wind industry. Four companies—GE, Siemens, Gamesa and Mitsubishi—have already agreed to sign up to a contract to start manufacturing in the UK, and we have been talking to others. That will create not only £300 million worth of new investment but new jobs.

The noble Baroness, Lady Parminter, talked about the need for an ombudsman, annual reports and targets. Those are very good points. It is important that we have an assessor for the accreditation scheme. I will take those very good points away and discuss them with officials.

The noble Baronesses, Lady Noakes and Lady Smith of Basildon, talked about the Bill’s timetable. I am no expert on timetables as I am a self-confessed virgin in taking Bills through the Lords, or any Parliament for that matter. It will not be possible to have 54 delegated powers draft SIs beforehand, but I shall be happy to explain the timetable and the powers that we are taking over the next few weeks. I am also happy to discuss the timetable with the noble Baroness, Lady Noakes, outside of that. We are committed to ongoing consultation on a lot of issues. In Committee there will be more detail about the consultation. We will consult formally on most of the SIs at the end of 2011 before introducing them in 2012. There will be a series of consultations and I am very happy to discuss the timetable of the Bill, and any additions to it, in the open way that we have addressed this so far.

I am grateful to the noble Lord, Lord Hunt of Chesterton, for his support for the Coal Authority changes. As we have discussed in camera, the Bill presents a very good opportunity for us all.

The noble Baroness, Lady Smith of Basildon, asked how the 2.5 million households in appalling conditions could apply for the Green Deal. I am grateful that she explained the pathway whereby the ECO would have been a good way of doing that. Between us, over the next few weeks we need to develop a clear pathway on how that will happen. She reasonably asked why demand for cavity wall insulation is falling. The fact of the matter is that, over the past few years, a lot of simpler cavity walls have been filled and demand is therefore reducing. However, we are now moving into the territory of complicated cavity walls. I am also extremely grateful for her suggestion, which she has made previously, about smart meters. Clearly, we must insist on an industry objective of sharing the same set of common standards. The noble Baroness is absolutely right on that, and we will have developed the specifications by the summer of next year.

The Chief Whip would like me to bring my speech to a conclusion, as would I. Therefore, I am very happy to write on other points made by noble Lords. However, I should like just to mention that boilers can be included in the Green Deal, provided only that the expected savings meet the golden rule.

I want to reiterate that the Bill will bring energy efficiency to homes and businesses across the UK. This is an important Bill and, as I said earlier, despite one intervention, I am grateful for the advice that I have received from all sides of the House. I will continue to benefit from that advice as we discuss the Bill and take it through the House of Lords. It is exciting that the Bill should start in this House. I look forward to continuing these discussions in Committee—in or outside the Moses Room.

I should also like to thank my officials, Hansard—whose staff are incredibly tolerant in these matters—all the staff and all noble Lords and noble Baronesses for their support. I wish you all a very happy Christmas and, indeed, a prosperous new year.

Bill read a second time and committed to a Grand Committee.

Motion to Adjourn

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