Energy Bill

Lord O'Neill of Clackmannan Excerpts

Monday 28th October 2013 Lords Chamber

[Lord Teverson (LD)]

My Lords, I commend the noble Lord, Lord Oxburgh, on his amendment. Decarbonisation is fundamental, and is absolutely what the Bill is all about. The 11th word of the Bill is “decarbonisation”. The Long Title refers to,

“reforming the electricity market for purposes of encouraging low carbon electricity generation”.

The entirety of Part 1 of the Bill is about decarbonisation. The methodology there allows the Secretary of State to set a decarbonisation target. The Bill is about nothing if it is not about decarbonisation.

Of course, the majority of the Bill beyond Part 1 is about ensuring, not just through targets but in practice, that we have decarbonisation. There are many chapters about the nuclear industry. Whether one is for or against nuclear, it is a low-carbon technology and it is enabled by the Bill.

The Bill has a whole chapter devoted to the “emissions performance standard”, which is all about decarbonisation. I have a number of issues with it, but the standard is there and it is the practice for ensuring that decarbonisation actually happens. There is a whole chapter on the capacity mechanism, introducing the possibility of electricity and energy demand reduction and management.

Of course, at the core of the Bill, are the contracts for difference, which have taken up a lot of our time in Committee and elsewhere in the House. Contracts for difference would not exist, would not be in the Bill, if there were not a practical and urgent need to get low or zero-carbon technology investment into the generating sector.

There is no point in having this Bill if not for decarbonisation. As we know, this Bill started back in 2010 with a White Paper and has been through many other processes. It is all around one of the four pillars of government at that time—which are still there and which include carbon capture and storage—trying to decarbonise, in this case, fossil fuels, as the noble Lord, Lord Oxburgh, will know better than anybody. The second pillar of this energy strategy was emission performance standards, which are in the Bill. The third pillar was the carbon price floor, which has already been delivered. In terms of green taxes, we are already taxing output of carbon emission from fossil fuels. That is practical decarbonisation. In addition, the Government have introduced energy reduction through the Green Deal and the energy company obligation. As well as all these practical actions, do we need another target? That is what I really want to look at.

As this is a coalition Government, there are differences not just between parties but between departments. We have differences between the Treasury and DECC on occasions, and perhaps BIS as well. There are also different directions in which the two coalition parties look. Nevertheless, what the coalition came together for was to provide a specific programme in terms of government for the five years of this Parliament. A key part of that concerned the economy and debt reduction. Another, which both parties shared, was being a green Government with respect to the environment, part of which is decarbonising. The agreement, willingly entered into by both parties, called for a levy control framework that allows contracts for difference and decarbonisation investment to work, with some £7.6 billion by 2021. We have an agreement that the energy company obligation, which is really important in terms of households’ energy efficiency, stays at its present level until the end of this Parliament. We have electricity demand reduction in the Bill. We have an agreement at EU level that a 50% reduction of carbon emissions by 2030 should be negotiated with our European partners. We already have the carbon tax floor and we have emission performance standards legislated for, we hope, when this Bill finally gets through.

We, as Liberal Democrats, ask whether it is more important to deliver targets at this time, when issues of energy—energy bills and energy security—are so fractious, perhaps between all parties. Is it important to make sure that through this Bill we deliver real, practical, £100 billion-worth of investment decarbonisation, or do we go for just another target? I look back at targets, whether they were for fuel poverty being eradicated by 2010, which failed quite considerably, or whether carbon emissions for 2010 were met—they were not in terms of the original obligations. Do they make a difference for business? Yes, I think that they do—the noble Lord, Lord Oxburgh, is right.

What makes the real difference in terms of investment? It is stability and understanding that there is the right environment for investment in terms of cash flow, in terms of where the market is going and in terms of a determination to deliver a much broader agenda for investing in decarbonisation. That is the area that I feel is of the greatest importance. We should have a decarbonisation target. I am happy to wait until 2016 to deliver real decarbonisation.

[Lord O'Neill of Clackmannan (Lab)]

My Lords, in proposing Amendment 2A in this group, I will go roughly along the same lines as the noble Lord, Lord Oxburgh. We had to wait six minutes to get any indication of the previous speaker’s attitude towards these amendments.

We have all had approaches from a plethora of organisations; in my years in this House and the other place I can rarely remember such a broad coalition. You normally get the greens and one or two others, but it is quite surprising to get support from across the spectrum of industry, banking and environmental concern for an amendment along the lines that the noble Lord, Lord Oxburgh, and I are proposing. The amendment I have tabled is in some ways slightly different from the amendment in the name of the noble Lord, Lord Oxburgh, in so far as it seeks to define the decarbonisation obligation, which it sees as the level of carbon intensity of electricity generation which may not be exceeded in total kilowatt hours. However, it does not set a target by plucking a figure out of the air. The idea is that it should give the Minister probably longer than the amendment in the name of the noble Lord, Lord Oxburgh, which gives the target of 1 April. Amendment 2A mentions 12 months, which would mean another six months in the process. That is important in itself.

The other fundamental requirement is that having set up a Committee on Climate Change, the Secretary of State should take account of what the committee has to say and what its findings are. It is a very important body, formed of a distinguished group of people from academia and business who take an interest in these matters—and it has a distinguished chairman from this House. However, it is not the only body. We are seeking to establish a consensus that would broadly agree to the figures that would then emerge.

We have international obligations, some of which have been imposed upon us, in so far as we have been forced to troop in and put our hand up in the Council of Ministers. In this instance we seek to fill a gap in the British obligations beyond 2020, a gap that would effectively extend from 2020 and 2030. It is important that any Government can go into Europe with a clear programme so that we are not seen to be chasing an agreement—and equally, so that the target figure we would set ourselves would be arrived at by British agreement and British discussion. A country of 60-plus million people with our diverse industry, economy and geography is that kind of country, the limitations or parameters of operations of which are very similar in many respects to a lot of the member countries of the EU that will be sitting on the Council of Ministers in this area.

Some say, “We mustn’t be allowed to be dragged along by the EU”, but in this instance we would be, in many respects, ahead of the game—not, however, to get our green badge to put on our jacket. Rather, we will have made a rational decision on the basis of sound information and wide discussion, and we would be doing so because it is necessary for us to have a degree of foresight. I will not use the word “planning”, but “foresight”. We have to recognise that the investment requirements of our energy economy are not just only long term. I remember talking here about setting down roads. We know that we have a 2050 target, but frankly, at the moment, after 2020 there is no road map and no signposts or proper targets. We must recognise that we will not have 30 years of doing a bit of this and that, then a mad helter-skelter run between 2040 and 2050 to try to get to where we are supposed to be. This has got to be done on the basis of proper consideration. These amendments give business, the investment community and the people who are engaged in research signals regarding the kind of timescales in which to operate.

--- Later in debate ---

[Baroness Maddock (LD)]

My Lords, I have great sympathy for the words spoken by the noble Lord. He and I and one or two others in this House have campaigned on fuel poverty for a number of years, although he will remember that, when as a Minister he wrote his draft fuel poverty strategy, he hoped to eradicate it by 2010. That indicates what a difficult issue this is. I am grateful to the Government for, after cross-party lobbying, putting into the Bill a strategy for fuel poverty. I am very pleased about that.

This is very pertinent at the moment. I do not know if noble Lords noticed that as the storm went through the temperature dropped. I only just made it in on my train today. As I walked across, I could feel the temperature dropping. Elderly people particularly are getting very worried about how they will pay their fuel bills this winter. We know but many do not understand that if you are older and have heart problems, problems with blood circulation and so on, you do not need to get very cold for it to have a serious effect.

I have campaigned on this issue for as many years as I care to think about. In my 20s, I lived in Stockholm in Sweden where pensioners did not die in wintertime because they were too cold. They did not have arthritis. They lived in properly heated houses. Here we are in 2013 and we have still not managed to achieve that. I recognise that it is a very difficult problem but I hope that my noble friend can at least give us some warm words in response to the noble Lord, Lord Whitty. Many noble Lords care passionately about this issue. It is time, as one of the richest nations in the world, that we dealt with it.

[Lord O'Neill of Clackmannan]

My Lords, I start by declaring an interest: I am a vice-president of National Energy Action and the president of Energy Action Scotland. The Government have made some moves on this issue in the course of the Bill’s passage, but it would help if they would add to the list of objectives they have set themselves the one concerning fuel poverty mentioned in this amendment tonight. That would be a signal that this is not an issue of party conflict, and indeed that the Government have recognised that one of the deficiencies in the Bill is that insufficient attention was initially given to fuel poverty.

Now that we have had recognition, we can probably argue about the niceties when the appropriate time comes. We are all in favour of the earliest possible elimination of fuel poverty. It is not just about prices. It is about handling our grossly inadequate housing stock. Before too long we may well have to look afresh at the Green Deal that at the moment has, as far as I know, attracted something like 57 successful completions—one for every one of Heinz’s varieties; that is perhaps all that one could say about the proposal. People may find the money and find it attractive to accept the Green Deal at the 7.5% interest that is being charged, but I very much doubt it.

More has to be done on this. It would be helpful to have a clear indication that an opportunity is available with this amendment to put in the Bill, as one of the overarching targets of the Government’s energy policy, that we should as a high priority be able to eliminate fuel poverty. If we all agree on it, why is it not there? It is not a particularly controversial amendment. It is one that would enhance the credibility of the Bill and make easier the passage of future elements in it, which I am sure the Minister is looking forward to bringing before this House.

[Baroness Verma]

My Lords, I thank the noble Lord, Lord Whitty, for his amendment and all noble Lords who have taken part in this short but important debate. It gives me an opportunity to lay out the Government’s objectives for reform throughout the development of the EMR proposals. These objectives have been set out in the published documents, from our White Paper in July 2011 and within Clause 5, to reflect our aims of reform. This does not mean that other aims, such as minimising fuel poverty, are not important. I agree with noble Lords that this area is incredibly important to us all. As outlined in Clause 5(2)(d), the Secretary of State will have regard to the likely cost of electricity to consumers. This means all consumers, including the fuel poor.

Our analysis suggests that, as a result of EMR, household electricity bills will be on average around 9%, or £63, lower per year over the period 2016 to 2030, relative to what they would have been if decarbonisation were achieved through existing policy instruments. The impact of EMR will be to reduce fuel poverty compared to what it would have been without those policies in place.

However, we should not be complacent. With or without EMR, electricity prices are likely to increase over time due to rising fossil fuel prices and the rising cost of carbon. This is why we have in place a strong package of measures to support low-income and vulnerable households with their energy costs. The energy company obligation ensures that help goes to low-income and vulnerable households to enable them to heat their homes more affordably on a long-term basis. Through the affordable warmth and carbon-saving communities obligations, we anticipate that support should reach around 230,000 low-income households each year. In addition, this winter around 2 million households will get help under the warm home discount scheme, including over 1 million of the poorest pensioners, who will receive £135 off their electricity bill.

In the last financial year, winter fuel payments helped over 12.5 million older people in over 9 million households with their fuel bills, providing between £100 and £300 tax-free to help pay for heating bills. During the same period, 5.8 million cold weather payments were made, targeted at those households that are most vulnerable to the cold. This Government are committed to helping the fuel poor, now and in the future. That is why earlier this year I proposed amendments to the Warm Homes and Energy Conservation Act, to put in place a new, rigorous and flexible framework for measuring the Government’s progress in tackling fuel poverty in England. As we move forward with ensuring a safe low-carbon future we must be absolutely sure that we do not leave the fuel poor behind.

The noble Lord, Lord Whitty, mentioned the Prime Minister’s announcements last week on green taxes and the review of their impact on the fuel poor. The Government are looking at how to get people’s energy bills as low as possible to help the very families to which the noble Lord refers. We are already increasing competition by bringing new players into the market to offer consumers real choice. The most vulnerable are getting direct help with their bills this winter. We will continue this work to make sure that consumers get a better deal. No one is talking about changing support for large-scale renewables or feed-in tariffs. We want to make sure that those who need help get help. I hope that the noble Lord, Lord Whitty, finds my explanation reassuring and on that basis will withdraw his amendment.