Electricity and Gas (Energy Company Obligation) Order 2012

Lord Teverson Excerpts

Monday 23rd July 2012 Grand Committee

I return to the list of qualifying energy improvements. One improvement regarding oil-fired condensing burners jumped out at me from the page. It raised a general point. In the areas that are not connected to the gas network, involving a lot of hard-to-heat houses in rural areas, it will be an improvement to put in a new high-efficiency oil-burning condensing boiler. In other circumstances that would be the wrong solution. The right one would be to switch from oil to gas. That probably applies to a number of these other measures where they are sub-optimal. Adopting one technology may bring some improvement to energy efficiency, but not the optimum improvement. In the application of these improvements is there an assessment as to whether it is the best, or near the best measure for that particular house and that particular building and household, as distinct from whether it can achieve and even meet the golden rule under the Green Deal terms? The Minister may wish to write to me about that as well, but it would be useful before we went much further if we could have some answers to these questions.

[Lord Teverson]

My Lords, this is the first document that we have debated in the House that refers to the carbon-saving communities obligation. I want to welcome that because it plugs a hole. The Government have listened and put that in. It is important that that has happened.

I do not want to take over the Minister’s task, but I say to the noble Lord, Lord Reay, that energy efficiency is costly now, but we are paying the cost of the lousy house constructions of the 1950s, 1960s and 1970s. Someone has to pay for that, and unfortunately it has come to us, our generation, to do it. Is that the right thing to do? Absolutely everything that I have ever read, seen or had numbers on has said that energy efficiency is a far more cost-effective way of reducing energy demand or decarbonising than all the other technologies that we tend to talk about. It is completely obvious that it is better to save than to spend to save later. That is why the Green Deal and this area of the ECO are important.

The noble Lord, Lord Whitty, made a number of points on which I agree, and there are a lot of question marks about how things will roll out, but I get the impression from the Government’s mood changes, which are welcome, that the Green Deal is such a large, important, new and innovative programme that it is impossible to nail down all the details right away. We are going to have to go through a learning curve as we implement it. We obviously have to get a number of bits of it tied down, but I am sure that over the first one, two or three years, the programme will change in detail because some of it will not work and some of it will. That is why I welcome the fact that there is not a big-bang launch of the Green Deal but an introduction that tries to learn from the initial experience of rolling it out.

I know that this is a DCLG issue, but I should be interested if the Minister can tell us how the 2016 deadline on, effectively, zero-carbon houses is going. I know there are a number of challenges around achieving that, but I would dearly love to understand whether we are now approaching that optimistically so that in future we do not have the problem that we inherited from those post-war decades of bad house construction.

My list of specific questions for the Minister is even shorter than the list of the noble Lord, Lord Whitty. We want to get a lot of people out there to take advantage of the affordable warmth part of the energy company obligation. What plans do we have to make sure that those people are aware of this scheme and get it to work if they are not approached by their energy supplier? That is always a problem with these issues.

The noble Lord, Lord Whitty, made a point on the rented sector. I am not as pessimistic about the rented sector because the scheme is written with the debt applying to the meter, so there is every incentive for even a short-term tenant to get the Green Deal if they want because they do not have to pay it back later on if they move on in a few months’ time. It still requires them to be motivated to do it, to be told that they can and to be able to understand that. I would be interested to understand the Government’s point on that at the minute. This will require working with local authorities to roll this out street by street, neighbourhood by neighbourhood, and village by village.

Lastly, there is a small issue around warranties. The warranty conditions under the Green Deal are pretty good now. I would like to understand from the Minister whether we are going to have an equivalent warranty position on the affordable warmth programme.

[Lord Grantchester]

I thank the Minister for his explanation of the orders. From our side, we are pleased to continue our support for the Green Deal. Any demand-reduction and energy-efficiency improvements are vital for meeting greenhouse gas emissions targets, energy security and climate change mitigation. It has been reassuring that the coalition Government have continued along the pathway set by our previous Labour Administration, but it has been frustrating that progress has been slow at times. While recognising the imperative that measures must be fully budgeted, it has been frustrating that schemes have oscillated wildly, as happened with the feed-in tariffs fiasco, undermining confidence and jeopardising investment.

When readjusting payments in the future, it cannot be stressed enough that adjustments must be smooth and based on accurate and meaningful calculations. I begin with the energy company obligations—ECO. Since the passing of the Energy Act last year, it is recognised that there will necessarily be a period of consultation and drafting. It is recognised that the Government have responded positively, and the noble Lord, Lord Teverson, was correct to draw attention to this in his remarks.

The proposals strengthen key areas such as consumer protection, strengthen protections for lower-than-average energy users and those in rural areas, and adopt Labour’s proposals to include hard-to-treat cavity wall insulation. However, there is concern that following the Minister’s department’s downgrades the schemes will not achieve the targets necessary. The Government have been high on hyperbole and claims, to quote the Minister in the other place,

“to improve 14 million homes by 2020 and a further 12 million by 2030”.

Now that we have the final impact assessment, these claims can be assessed in detail. The actual figures are much less stunning.

The department’s figures for loft insulations suggest that they will fall from about 900,000 this year to just 150,000 next year, a decrease of some 80%. Cavity wall insulations will drop from 700,000 to 400,000 in 2013. Solid-wall insulations will remain the same as this year. These downgrades will have significant consequences for the industry, for the country’s ability to meet climate-change targets and, most importantly, for the many hard-pressed households struggling with everyday energy bills.

As to the Government’s consultations and dialogue with industry, there are several detailed points on which I will press the Minister. The industry has signalled that it is keen to work with government, and has made significant progress. My noble friend Lord Whitty has already spoken to points raised by the Combined Heat and Power Association on district heating. The ECO is intended to work in tandem with the Green Deal policy to enhance further the installation of cost-effective energy efficiency improvement measures, especially measures not fully financeable through the Green Deal alone—for example, through solid-wall insulations. A supplier may support a measure under the ECO. However, it is not clear what is the process under which the ECO may be triggered and join up with the Green Deal, and how the hierarchy of providers, assessors and the bill payers will have clarity of responsibility. Once again, my noble friend Lord Whitty has highlighted this issue, especially the difficulties of fuel poverty.

We are keen to see the Green Deal be a success. However, there are continual concerns raised as each proposal is announced. It is not only Labour that is raising concerns. A coalition of 16 organisations, including Consumer Focus, SSE and the WWF, recently issued a paper, which stated:

“The Green Deal and ECO, as they currently stand, are nowhere near sufficient to meet the challenge of eliminating fuel poverty and ensuring affordability for all”.

Low take-up will seriously impact the British installation industry. It has been claimed that the Green Deal will create 250,000 jobs. Now, in the impact assessment, the department has downgraded its estimates again. The Minister in the other place has put the figure at a mere 34,000 jobs created by 2050. Under the department’s worst-case scenario, only 12,000 jobs may be created by then. Every new job is to be celebrated at a time when the Government’s economic policies are making many people redundant or out of work. Does the Minister have an update today on how many jobs will be created by the Green Deal next year and up to 2015?