Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Infrastructure Bill [HL]
Lord Whitty Excerpts
Lord Whitty
“National Infrastructure Plan: energy efficiency
The National Infrastructure Plan shall be altered to include investment in measures in the domestic and commercial sectors delivering reductions in energy use through increased energy efficiency and investment in such areas shall be subject to the same criteria as other items for inclusion in the Plan.”
Lord Whitty (Lab)
My Lords, in moving Amendment 94 I will speak also to Amendment 94A. The first amendment is in my name and that of my noble friend Lord Judd while the second is solely in my name. Both deal, essentially, with the same issue. The first is a general statement of principle—that energy efficiency should be considered alongside other options for the delivery of infrastructure improvements and dealt with on the same basis. The second goes into rather more detail and sets various conditions, in that any proposals would have to meet carbon targets, contribute to the reduction of fuel poverty and be compatible with and considered alongside other investments in energy infrastructure. I do not mind which of these two amendments the noble Baroness accepts. I would be quite happy with either or both, or perhaps even a better one from her, but the essential point here is that energy efficiency is underregarded when we look at the programme for national infrastructure.
The Government have produced a lot of papers on infrastructure. The one in June 2013, which was not the first, has effectively nothing about energy efficiency. There is a brief obtuse reference at one point to the Green Investment Bank but nothing else. The National Infrastructure Plan itself, which came in December 2013, had a whole chunk on energy going through all the different aspects of energy, from the heat programme through to all the different bits of generation. It mentioned the strategy for fuel poverty; the noble Baroness answered a Question from the noble Lord, Lord Ezra, a few days ago, saying it was going to be published in spring 2014, so we are slipping on that. It waits until right to the very end of the provisions on energy before it mentions smart meter rollout, the only aspect of energy efficiency which is mentioned therein. There was then another document, a finance update for the infrastructure plan, which was delivered in March this year. Again, that did not mention energy efficiency.
It is important that investment in energy efficiency is seen alongside “big bucks” investment in generation and improvements in the energy system itself. Delivering energy efficiency improvements has the best return, pound for pound, of any investment in energy in terms of carbon saving, of cost saving to the consumer and of energy saved. A relatively recent Cambridge Econometrics study showed that very clearly. It also is more labour-intensive and therefore creates more skilled and semi-skilled jobs. It benefits the whole of the country rather than part of the country, as some of the infrastructure projects do on the transport side and some of the energy ones on the employment side. Hinkley Point will be great for west Somerset, and I very much approve of it being there, but it does not benefit employment much anywhere else in the country.
I mean a range of things by energy efficiency investment. My principal concern, as noble Lords will recall, has largely been on investment in the housing stock, both in terms of retrofit and of future build. However, that is only one part of it. There are other parts of investment in infrastructure and retrofitting investment that the Government have not touched at all, which relate to commercial buildings and to the use of energy more generally in our economy and on the industrial side.
The very latest document, which the Minister was kind enough to send us last Friday, Delivering UK Energy Investment, is a superb publication. It is possibly a bit glossy, given the history of DECC in this regard, but it has obviously decided that it has to present itself effectively. The last section of the document contains a lot of information on energy efficiency, although some of it is subject to some rather specious claims. In fact, it starts out by saying that, in terms of energy intensiveness, the UK is the “least energy intensive” of all G7 economies. That, however, reflects the structure of the economy and is not a like-for-like comparison, certainly as regards our housing stock, which is universally recognised as being one of the least efficient in Europe.
The energy system itself is subject to some outmoded forms of transmission and distribution which will require attention. That is, indeed, mentioned in the document, but only in the context of the electricity demand reduction dimension of the capacity mechanism, on which we had a lot of discussion during the passage of the Energy Bill. I think Members on this side of the Committee, and many other noble Lords, find this somewhat lacking in precision as yet, but we should be grateful that it is there. However, the broader concept of energy efficiency is referred to in relation to smart meters, investment under the Green Deal and money spent under the ECO. In my opinion it gives a slightly exaggerated view of how effective that is going to be. I am in favour of the ECO. However, the provisions introduced by the Government in the last few months in response to the Prime Minister’s attack on “green crap”, which was presumably an organic predecessor of the “green blob”, means that we now have the ECO spread out over a much longer time period. It is therefore less rapid and less of an investment than was the case as it was originally conceived. Meanwhile, of course, a lot of the predecessor schemes have disappeared. Although the Government are putting some money into that provision, it is relatively low level.
Although these things are going on, they are not considered in the same light as the investment in large-scale generation, the whole of ERM or, indeed, the capacity mechanism, and they are not assessed on the same basis. As I said at the beginning of my remarks, the return on energy efficiency measures, as analysed by countless economists, is much greater than the return on generation investment, whatever the form of generation we are talking about—offshore wind, nuclear, or, indeed, gas or coal—and in carbon- saving terms it is also greater. It seems to me therefore that there is a gap in our approach to national infrastructure on the energy side, although some of this applies also to the transport side because improvements in transport energy efficiency ought to be considered in the same light. If we are looking at how public and private money is spent and directed on infrastructure, investment in energy efficiency should be considered on the same basis, at the same time, with the same degree of urgency and with the same degree of government backing. That is not the case at the moment. These amendments are directed at ensuring that the widest aspects of energy efficiency are reflected in that strategy—a strategy to which the Government rightly give priority in terms of public spending on a public policy, but also one which will directly benefit the consumer and businesses operating within the UK. It will also benefit them early whereas many other investments will take five or 10 years to pay off in terms of energy supply. Therefore it will improve the economics of British industry and business in general.
So the arguments for energy efficiency in all its forms being up there as part of the infrastructure programme are pretty irrefutable. I am not saying that the Government have done nothing on this front but the failure to consider energy efficiency in the same light has meant that such programmes are regarded as lower priority and less exciting, and they are not given the same degree of importance. My amendments attempt to begin to change that. The next version of the National Infrastructure Plan, due at the end of this year or the beginning or next, should reflect this very explicitly with a whole section on energy efficiency rather that it being regulated and only partially covered in the documents. I believe that DECC recognises this but it needs wider recognition across government as a whole so that we are not dependent solely on a glossy DECC publication—welcome though that is. Right in the heart of Treasury thinking on industrial policy, energy efficiency should be up there and treated in the same way as the other infrastructure priorities. I beg to move.
Lord Jenkin of Roding (Con)
My Lords, this is an important amendment. I was glad that the noble Lord, Lord Whitty, gave the Government credit for what has been done. A good deal has been done. I am sure that the noble Lord will have studied, as I have, the paper produced last month on the Energy Savings Opportunities Scheme. It now has its own acronym—ESOS. One can read quite a lot about ESOS.
I was very encouraged the other day by reading of a meeting attended by my noble friend Lord Deighton, the Commercial Secretary to the Treasury. To quote from a press release, my noble friend,
“today said he is ‘extremely attracted’ to the idea of reframing home energy efficiency as one of the UK’s top 40 infrastructure priorities”.
The noble Lord, Lord Whitty, may well be pushing at an open door. My noble friend has very considerable influence on these matters and comes to this House and his job with a very great reputation for what he succeeded in doing in the case of the Olympic Games. As most noble Lords will recognise, he is a figure to be regarded with considerable respect not only in this House but outside it, too.
My noble friend was asked by the Green Building Council chief executive, Paul King,
“whether the Government needed to change the mindset on home retrofit from thinking about 26 million small problems to one major infrastructure opportunity. Lord Deighton said he was ‘seduced’ by the idea of reframing the debate on energy efficiency and that ‘Government should lead’ on the agenda”.
Coming from that source, I hope my noble friend on the Front Bench will sing from the same hymn sheet. It is perfectly clear—as the noble Lord, Lord Whitty, eloquently put it—that this policy has no down side and very considerable upside attractions if one can reach the point where one needs to invest less in production because one is saving more and using energy a great deal more efficiently. That seems to be highly desirable.
It is very interesting that an organisation called the Energy Bill Revolution, which sent me a brief on this recently, quotes research from Cambridge Econometrics showing that energy efficiency schemes,
“outstripped all other investments and tax breaks by creating over 70,000 jobs by 2015, and the boosting of GDP by 0.2%”.
It goes on to say that the key reason for those figures is that the high level of job creation is because it is much more labour-intensive than many other forms of energy investment and much less material-intensive than most construction projects.
Lord Whitty
My Lords, I thank the Minister for that reply. I am very appreciative for all the support from noble Lords around the Committee on the principle of these amendments and, perhaps, even more delighted that in his absence the noble Lord, Lord Deighton, appears to have pre-empted me and got into the heart of the Treasury the precise intention of the amendment—that whatever else we do with energy efficiency, it needs to be considered on the same level, at the same time and on the same criteria as other infrastructure projects.
There is a lot of experience around this Room, but there is an essential truth in what the noble Lord, Lord Deben, said and what my noble friend Lady Worthington said in a rather sharper tone—that infrastructure projects narrowly conceived have an attraction to Ministers that pushes out priorities that might be given to projects that are slightly more mundane but equally effective and important for the future of our economy and society.
It goes a long way back. As a very junior civil servant in the late 1960s, I was in the Ministry of Technology. It and the NRDC, as it then was, had energy efficiency as one of their objectives, but it was pretty low down the list. We had all sorts of sexy and exciting things such as Concorde and nuclear power stations to deal with, and it rarely rose above the surface. Subsequent departments, although they quite often had quite a lot of people working on energy efficiency, did not really improve that status. I become Minister for Energy Efficiency in 2001, and it was a very frustrating job, partly because it was isolated in a different department from other energy issues, but whatever the structure of Whitehall, all Ministers who have had that responsibility have found it frustrating.
In my opening remarks, I spoke about importance and priority, but status is also important. I hope that now we have energy located in one department—it has taken a few years to put it together—that the civil servants dealing with this issue are accorded status equal to that of those who are dealing with big power stations and other infrastructure projects and that that is reflected in the way in which the department operates with other departments around Whitehall, and in particular with the Treasury, which, until I heard the remarks of the noble Lord, Lord Deighton, repeated by the noble Lord, Lord Jenkin, and the noble Baroness, Lady Maddock, I had thought was still going to be an inhibition. It appears that it is now going to be a fairly substantial supporter of the intention of these amendments. I would have thought that that might carry some weight with Ministers at DECC.
We can argue about how much is being done, and a lot is being done. We can argue about its efficacy and balance, but that is a separate argument. We are saying that we have a national infrastructure plan that is revised every year or two—I hope that will continue—and that the projects within it gain status by their inclusion in terms of capital expenditure and political attention which other projects do not have. If we are to bring together all the different aspects of energy efficiency and put it on the same basis as other infrastructure projects, it should be explicit. Indeed, in the energy section, it is arguable that it should be at the top because the degree to which you are successful at energy conservation and energy efficiency defines the degree to which you have to have new generation projects and speed up distribution and transmission.
I do not accept the Minister’s view that because a lot of things are being done and are reflected in important reports from the Government, the department, the Committee on Climate Change and other bodies we should ignore what lies behind this. Infrastructure is the word of the moment as all political parties approach the general election. I hope that whoever are the Government after the general election, infrastructure improvement remains up there in lights and if other things are up there in lights—“lights” is probably the wrong word to use in an energy debate—energy efficiency needs to be there as well. Whoever produces the next national infrastructure plan should include energy efficiency in an important place within that programme. At the moment, it is not there.
All this is not technologically specific. It is simply saying that whatever programmes there are for energy efficiency, they need to be up there in parallel and justified on the same cost-benefit or whatever analysis applies to other infrastructure projects. I do not think that on reflection the Minister would have any real difficulty with that. It appears she has the support of the Treasury. She has two or three months to think about it before we come back after the Summer Recess. I would have thought that that was ample time. If she does not like my phraseology or we need to make it more clear, defined and acceptable to her colleagues, I am quite happy with that, but the burden of argument in the Committee is that she must come back with something and that the next infrastructure plan must reflect that. I beg leave to withdraw the amendment.
Lord Whitty
My Lords, I want to make just a few remarks on this. I do not quite share my noble friend’s rosy picture of the effect of the oil and gas industry on the British economy. Although benefits were derived from the period during which Britain was an oil producer, it distorted the rest of the economy. That need not necessarily have been the case, had we had a plan to use the proceeds from North Sea gas and oil in a way which developed the rest of the economy. Instead, large sections of the manufacturing sector disappeared. We did not have a clear strategic plan for the totality of the economy although there was a fairly clear strategic plan as regards the exploitation of North Sea gas and oil itself.
I do not wish to prolong that situation during the decline of North Sea gas and oil. We now need to plan for the transition. That is, in a sense, what the Wood report is saying. The mechanism for doing that is in part reflected in these government amendments. They are, however, slightly odd amendments because they effectively propose the basis for a new regulator. As that regulator is not yet in being, reference is made to the Secretary of State. Presumably, the Minister will be able to confirm that at some point down the line we will have new primary legislation which sets up the structure, governance, powers and responsibilities of the new regulator, in which case some of these measures will have to be rewritten not very far down the line. I am not necessarily against that but it means that how the measure is written in relation to the Secretary of State will be different when we have a fully fledged regulator. There will be different parliamentary oversight apart from anything else.
My next point follows that made by my noble friend on carbon capture and storage. It is important to recognise that the continuing use of fossil-based fuels will not be compatible with our carbon targets unless there is some form of carbon capture and storage. Moreover, the North Sea has bequeathed us a significant natural facility for storing that carbon. The whole issue of enhanced oil recovery and the use of that storage for carbon dioxide storage in the future is vital. Indeed, in the whole of Europe, and possibly the world, there is no more obvious place where we could store the carbon produced through the continuing use of fossil fuels, with, I suspect, relatively little local opposition.
When the noble Lord, Lord Cameron, and I were involved in the Select Committee report on European energy, we found that Germany and other central European countries were very opposed to carbon capture and storage taking place among their population and on their territory. However, in Britain we have a real opportunity to offer the totality of the European energy and industrial network the use of those North Sea facilities, which would last a long time. I once asked someone to put a timescale on that but it will certainly see us out and will probably be longer than the period during which we have extracted North Sea oil and gas. It is therefore important that the carbon capture and storage element is written into the strategy and the legislation paving the way to set up a new regulator, as my noble friend’s amendment would do. Therefore, I hope that the Government will accept it.
My last point is tangential and requires the Minister to talk to her colleague, the noble Baroness, Lady Kramer. Amendment 94B and the subsequent amendments seek to establish the provisions of a licence. Some noble Lords may remember that when we started to discuss this Bill a few weeks ago, we talked about a licence for a new highways company. The noble Baroness, Lady Kramer, said that that would all be dealt with in the licence. However, in relation to energy, primary legislation is required to set down what the licence will cover. I think that we need a reply from the Department for Transport at some point as to why we do not need the equivalent in relation to the corporatisation of the Highways Agency into a body that will itself require a licence. The questions that I and others have raised on the nature of this new body have been brushed off by it being said that it will all be in the licence. When we come back to the front end of this Bill, I may start asking those questions again. I do not expect the Minister to answer that now, but perhaps she or her officials could convey that to their opposite numbers in the Department for Transport.
Lord Jenkin of Roding
I shall make a few observations on the speeches that we have heard from the noble Baroness, Lady Worthington, and the noble Lord, Lord Whitty. The Government are pursuing carbon capture and storage. They have put up £1 billion, which will probably not be necessary, and have identified projects that will be supported, one of which is the project at Peterhead, which will use the storage available in the offshore oil field. That is exactly right. I have asked questions in the past about the perfectly good saline caps onshore and why they could not similarly be used; they have exactly the same provision to be able to keep material indefinitely over millennia. Some of them are now being used for gas storage. I was pleased to hear today that there has been quite a significant increase in gas storage in recent years—something for which I and others have been arguing. It is entirely right, as the Secretary of State said in his Written Statement that,
“the principles will apply to offshore activity, however Government intend that the OGA’s remit should extend to onshore—as well as to the licensing activity for natural gas storage and unloading and carbon dioxide storage—and so, working with the respective industry stakeholders and trade groups, we will look to extend the principles accordingly”.—[Official Report, Commons, 16/7/14; col. 74WS.]
I am sure that that is right, but it prompts the question of whether these principles apply to the extraction of natural gas from shale. Different conditions may need to apply. Noble Lords have already referred to the idea of progressively replacing inevitably declining oil and gas resources with the apparently huge availability of shale gas in this country. I do not want to anticipate the debates that we will have in the autumn after the consultation on access to shale gas. However, the fact of the matter is that there are very large quantities indeed. It is interesting that the Bowland shale basin, which has been surveyed quite substantially by the British Geological Survey, is many hundreds of feet in thickness, quite apart from being two kilometres down, or whatever it is. Much of what was being extracted in America has been from comparatively slender deposits of shale. In that respect, we are sitting on a huge potential resource, which will need to be very carefully managed from all sorts of angles—environmental, and everything else. What we hope that OGA will do for the offshore oil and gas industry is to gain knowledge that will be applicable to these onshore developments, to which the Secretary of State referred in column 68 of his Written Statement. Of course he also said:
“Government will work closely with industry and other interested parties in the months ahead to undertake this work and ensure we are ready to put legislation on the additional powers before the House in the first Session of the new Parliament”.—[Official Report, Commons 16/7/14; col. 75WS.]
That is keeping up with the tradition of having a new Energy Bill every Session.
This is so important, and one has to get this right. Perhaps with the addition of the amendments that the Government have tabled, this is a very important step forward. One has to recognise that this is not inevitable; it has to be very carefully managed, and with the co-operation of the industry, government and eventually the OGA, which is a key player in this, there is no reason why it should not be achieved. I look forward to this with considerable optimism. It is a very good and attractive part of the Bill, and I hope that we accept the Government’s amendments.