Energy Policy (Winter Preparations)

Michael Fallon Excerpts

Wednesday 9th October 2013 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I must congratulate the hon. Member for Glasgow North West (John Robertson) on securing this important debate on energy policy and preparing for the winter.

We all recognise that we need to be reassured, and that we need our constituents to be reassured, as the chilly winter months approach. It is obviously difficult to predict what kind of winter this will be, but I assure the hon. Gentleman and others attending that the Government are confident in our energy capacity, that policies are in place to protect the most vulnerable and that we are promoting long-term energy-efficiency solutions for the winters to come. I think the hon. Gentleman said that prices had risen by £300 under this Government, but I remind him that they have risen more slowly in the first three years of this Government than they did in the last five years of the previous Labour Government.

Let me turn to the hon. Gentleman’s first point, on margin and capacity. He will have studied the assessments made by the National Grid and Ofgem. Those assessments say that the margin would tighten if nothing were done, but things are, of course, being done. Things are being done in the short term better to balance the system. Ofgem is consulting on a number of measures to ensure that there is better balance on the demand and the supply side. As the hon. Gentleman himself said, the Government plan to run the first capacity market—the reserve supply. We are ready to run the auction next year, so that supply can be available in 2018. He asked when further details of the capacity market would be made available; that will be in the next few weeks, before the legislation leaves the House of Lords.

On the outlook, the National Grid assessment is that the demand for energy this winter will be broadly similar to last year’s. We are not immune to the impacts of prolonged severe weather. A combination of a diverse range of import capacity and a mixture of storage types has performed well over the past few years, and we expect it to do so again this year. We expect electricity demand this winter to remain flat at current levels, and we have significant spare gas capacity, as the Holford and Aldbrough storage sites increase their delivery networks. Last winter, gas demand was around 290 million cubic metres a day. Our gas supply infrastructure can deliver more than twice that amount with high levels of secure flow from Norway and the continent.

[John Robertson]

It is good to hear what the Minister says, but the fact is that all we have heard of late is people saying that we will have black-outs. Are those companies playing politics because they do not like the Government’s policy? I agree with what the Minister has said, so why are we suddenly in black-out territory?

[Michael Fallon]

We are hearing about black-outs because of the totally irresponsible pledge of the Labour party to freeze prices artificially. The pledge, if it is credible, would have the immediate effect of discouraging precisely the investment in energy infrastructure that the hon. Gentleman and I want. That is why we read about black-outs, but it is a matter for his party to clarify. It needs to reassure us on how there could be a freeze without bringing to a halt the investment that there has been so far.

--- Later in debate ---

[Guy Opperman]

rose—

[Michael Fallon]

I think I had better make some progress, because the hon. Member for Glasgow North West raised several points that he wants answered.

I will deal first with the green deal, the energy efficiency programme. I will not comment on the sleeping patterns of the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), although I note what he said. We encourage people to think not just about keeping warm this winter, but about winter-proofing their homes for the future through a range of policies—not simply the green deal, but also the energy companies obligation.

The green deal is the Government’s most ambitious energy efficiency programme, and is designed to deliver improvements to homes and businesses throughout the country on an unprecedented scale and over a much longer time frame than a particular Parliament or public spending period. It is an ambitious 20 to 30-year programme. So far, there are more than 100 green deal providers and more than 2,000 individuals authorised to carry out assessments. Some 70,000 assessments have been done. The hon. Member for Glasgow North West asked specifically whether the interest rate was too high. Only 8% of households that have decided not to install green deal measures have said that it was because the finance package was unattractive.

[Guy Opperman]

Does the Minister agree that the energy policy is being affected by green deal funding and the domestic renewable heat incentive programme, which, certainly in Northumberland, has had tremendous take-up? Businesses such as the Centre for Green Energy in my constituency are expanding because of that policy.

[Michael Fallon]

I am glad to hear the good news from Hexham, because it is important to understand that those programmes are now up and running, and helping homes and businesses.

Alongside the green deal, there is the energy companies obligation, which has the twin objectives of reducing carbon emissions and tackling fuel poverty. Nearly 200,000 measures under the ECO have already been installed, with more than 60% delivered in low-income households in England, Scotland, and Wales. Alongside the green deal, the ECO carbon saving obligation supports the installation of measures for hard-to-treat situations—cavity or solid walls, and so on—which would otherwise be difficult to finance, but which are long-term energy efficient solutions. That is worth some £700 million a year.

The affordable warmth obligation—another part of the ECO—which provides targeted assistance to low-income, vulnerable people in private tenure households, through investment incentives to landlords, is worth about £350 million a year. That has already resulted in about 40,000 boilers being installed. In July we were already delivering 70% more heating measures through the affordable warmth obligation than were being delivered under the average rate of delivery for Warm Front, its predecessor policy. Finally, the carbon-saving community obligation, worth about £190 million a year, is supporting low-income communities, with at least 15% of funding delivering energy efficiency, particularly in rural areas. As of the end of July, we had already delivered more than 60,000 energy efficiency measures.

In addition, energy suppliers are supporting low-income and vulnerable households through our warm home discount scheme, which is worth £1.1 billion up to 2015 and is expected to support about 2 million households a year up to 2016. It is composed of four elements. The first is a core group, whose members automatically receive a £135 discount on their bills. Consumers who are either under 75 and not receiving the savings credit part of pension credit, or over 75 on the qualifying date and in receipt of a pension credit, are eligible. The discount rises to £140 in 2014-15. For older consumers who have less access to technology, that automatic payment is a big advantage. We expect this year’s automatic payments to be made by Christmas. Indeed, hundreds of thousands of payments will be made this month, giving people confidence that they can afford to turn their heating up when the cold weather sets in. The broader group also targets low-income and vulnerable consumers, but provides energy suppliers with the opportunity to set the eligibility criteria, which must be approved by Ofgem. The third element is a legacy spend group for suppliers to continue to provide support for customers who had previously been on discounted tariffs and rebates.

The hon. Member for Glasgow North West raised the matter of winter fuel and cold weather payments. We are committed to supporting pensioners through the winter months, and we continue to provide winter fuel payments; £300 will be offered automatically this winter to Britons aged 80 and over, and £200 will be offered to households with a resident above the current state pension age for a woman. Last winter, more than 12.5 million pensioners received winter fuel payments, which delivered £2.15 billion in support. If the average temperature for a region is recorded or forecast to be 0° C or below for more than a week, pensioners and those receiving income-related benefits will receive a cold weather payment of £25 for each period. Payments are made on recorded and forecast temperatures, ensuring that those on prepayment meters are proactively supported. Last winter, 5.8 million cold weather payments were made, delivering more than £140 million in support.

Beyond basic financial concerns, cold weather is a major public health challenge. Any extra death because of cold weather is to be regretted. We believe that local authorities are best placed to address local public health issues, and £5.4 billion in funding has been made available from 2013 to 2015 in England. Public Health England will publish the third annual cold weather plan in the coming weeks, and will work in collaboration with other Departments, as the hon. Gentleman suggested. It will set out several levels of response, which will encourage year-round planning.

I have not had time to answer all the hon. Gentleman’s detailed questions. I hope that he will allow me to respond to those in writing. However, I assure him that the Government are committed to keeping the lights on. There is an investment programme, encouraging investment in new sources of home-grown energy, and a framework in place to ensure that those in the most need are protected during the colder months.