Energy: Efficiency

Lord Whitty Excerpts

Monday 10th December 2012 Lords Chamber

[Lord Whitty]

My Lords, I am grateful to the noble Lord, Lord Teverson, for starting this debate and will go on to agree with quite a lot of what he says. However, I detected a note of slight depression in his voice at the paucity of attendance in this House, which reflects a rather longer-term lack of attention to energy efficiency in the spectrum of energy issues facing us. I was the Minister responsible for energy efficiency for several years in this House, among other responsibilities. When Defra had a debate on hunting about 500 noble Lords were here, but as soon as we got on to energy efficiency, we had about the same number as we have tonight. That reflects a bigger picture because energy efficiency is not sufficiently highly regarded in Whitehall and among other departments; nor, in many respects, is it among industry and society as a whole.

My basic theme tonight will be that the Government need to be much more aggressive in proclaiming the benefits of all dimensions of energy efficiency and in making sure that business and society get engaged in developing better energy efficiency in our country. The noble Lord, Lord Teverson, is quite right that the document that he referred to did not receive great publicity. It spells out all the benefits and some of the proposals for dealing with them, but it is pretty incomprehensible to the vast majority of people and was not picked up at all by the media. However, as it says, the return on investment pound for pound in energy efficiency is hugely higher than from the same amount of money invested in other aspects of energy and in most aspects of industry. The return is huge and, of course, energy saved is also carbon saved and is the most efficient way of saving on greenhouse gases.

We see a lot in the papers about shale gas, the nuclear option, whether Mr Putin is going to switch off the gas and the fact that there is a bigger coal burn than was anticipated in Britain, Europe and the rest of the world—all of which is setting back the kind of issues my noble friend Lord Judd referred to at the beginning of his remarks, in terms of climate change.

Energy efficiency is vital and we need to proclaim that from the rooftops, not add it on as the final chapter of every energy Bill and White Paper that we have seen over the past 20 or 30 years. We have to be careful not to overclaim, because as in the field of climate change and renewable technology, there are a lot of sceptics out there, who seize on any flaw in our argument. Energy saved is not 100% saved because there is a rebound effect and there are people out there who will therefore write off investment in energy efficiency.

Obviously, people use money saved from cutting their energy bills on other things, including more energy for something else or simply to keep their homes warmer. There is a rebound effect. The Government put it fairly low, at 15% for domestic consumers and almost nil for industry. It may be higher than that but it is never 100%; it is rarely more than 20% or 30%. It is a vast improvement to invest in energy efficiency, compared with investing anywhere else.

Of course, despite the fact that the public, business commentators and the media express very little interest in this area, we have had an era of hyperactivity from the Government, and rightly so. It was true of the previous Government—we did some good things, as have this Government—but we ought to be on the verge of a new era in this respect. We have the Green Deal, about to be launched properly—we have had a soft launch; I do not know if anybody noticed it—and we have smart meters. I never know why the two strategies are not combined because that would make a lot more sense to householders and consumers

We should recognise that a huge amount of work is being done by DECC in preparing for the launch of the Green Deal: accredited assessors are being trained, the products that are eligible for the Green Deal are being defined, the regulations are being put in place, and the Green Deal Finance Company is being set up. But this all starts in about six weeks’ time and there is hardly a punter out there who knows anything about it.

To a large extent, the same was true of smart meters. We now have standards for smart meters. In 2014 they become mandatory: all utility companies will be obliged to install smart meters in every home in the country, supposedly, over a period of five years—a massive conversion programme. How many householders actually know about it? About 40%, apparently, have vaguely heard about smart meters; a much smaller proportion know what they will do, how to use them and the benefits they will bring to consumers and society.

As a minimum, we need a major education and information campaign on these two programmes, and we need it now. It needs to be government-led; it must not be seen by householders as a marketing exercise by particular companies. Unfortunately, the companies involved in setting up something as complex as the Green Deal include energy companies and local builders, with banks providing the financial back-up. They are all absolutely needed and provide a huge amount of expertise, but they are not sectors that are hugely trusted by the average punter. We need that trust, which only government can convey.

The noble Lord, Lord Teverson, referred to the digital TV conversion. I was a bit sceptical that we would manage to deliver that programme, but of course it was delivered on a rolling region-by-region programme, whereas with the Green Deal and smart meters we are starting everywhere at the same time and hardly anybody knows about it.

We need a well resourced strategy of consumer information and engagement. Only a few weeks ago, the Minister said that we would be getting a strategy on engagement very shortly. Time is running out for 28 January. Will we get it before Christmas? Will we know what kind of programme is being run or supported by the Government before the Green Deal comes into play? Will we have a central delivery body, as elements of the industry advocate? At what stage will the Minister know the answers?

Of course, energy efficiency is not just about passive measures to improve the structure and resilience of buildings. At least two other dimensions should be included in an energy efficiency strategy. One is the issue of use. Even new buildings built to an extremely high standard do not in the event perform to that standard because the users do not know how to make maximum use of them. That is partly because the developers and architects are rarely the actual occupants and users; but there are also issues of product standards in our homes, in industry and in public buildings. The second dimension is the inefficiency in the system of distribution and transmission of electricity and gas, where a huge amount of heat is lost. We have never properly developed combined heat and power into being a normal part of industrial and domestic residential developments. Yet it can save 30% of what we generate in even the most efficient forms of energy generation, which disappears almost immediately into heat. We need far better development of our systems so that we use this heat and maximise the efficiency of the energy that we generate.

Some of the most obvious things are still a problem in parts of the country. I wrote a report last year on Northern Ireland, for example. The vast majority of households and small businesses in Northern Ireland still use oil for their heating, which is both expensive and extremely damaging in terms of carbon emissions. It would be much more efficient simply to connect them to the gas network. The same is true of parts of rural England and Scotland.

Almost my last point is this: the noble Lord, Lord Teverson, referred to the recent announcement by E.ON and the other energy companies. Clearly, price and the expectation of increases over the next few years will drive people and industry to look at energy efficiency more closely. However, the present tariff structure in our energy system for domestic consumers and in the contracts that the energy suppliers make with industry is doing exactly the reverse. We still have a situation where the more you use, the cheaper energy becomes. While the Government are struggling to make a reality of the Prime Minister’s commitment to offer everybody the cheapest tariff—I have a Question about this later this week—they should also look at how we can get Ofgem and DECC to move towards a tariff system that encourages rather than discourages energy efficiency.