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Energy Efficiency (S&T Report)

My Lords, I start by thanking all noble Lords who have spoken in today’s debate, in particular the noble Baroness, Lady Perry of Southwark, and all the members of her sub-committee and the members of the wider committee who have spoken today. I also thank them for the comprehensive and detailed report that they produced last year. We set energy efficiency at the heart of our energy White Paper in 2003, and it makes a key contribution to reducing carbon emissions as well as our other energy goals of improving competitiveness, ensuring security of energy supplies, and not least helping to alleviate fuel poverty. As has been quoted, the Prime Minister has said on more than one occasion that the Government believe that climate change is the greatest long-term challenge facing the world today. Therefore, we welcome very much the House’s attention to this most important issue, and we thank the noble Baroness for bringing her report to the House. We have made considerable progress since the committee published its report, in particular through this year’s Budget and in the UK climate change programme. I will not attempt in the time available to summarise the Government’s comprehensive response to what was a very substantial report. However, following the advice given by the noble Lord, Lord Dixon-Smith, I will, if I may, briefly outline the key developments, some of which have taken place since the report was published, that address some of the significant issues raised by the committee. I shall therefore not cover all the questions that have been asked. I will try to write to noble Lords with answers to those questions, including the two asked by the noble Lord, Lord Redesdale. Before I move on, however, I should tell him that I am one of those who does his best to remember to turn off his light when I leave my room in this House. The energy efficiency commitment is one of the two main policies designed to promote energy efficiency in households. We will seek to achieve substantially higher carbon savings from the energy efficiency commitment in its next phase from 2008 to 2011, representing a 50 per cent to 100 per cent increase on the current scheme. We have also made amendments to a Private Member’s Bill in the other place which, if successful, could set the energy efficiency commitment targets more explicitly in carbon terms and allow the inclusion of a wider mix of measures including micro-generation and behavioural measures. The committee rightly highlighted the importance of building standards, a matter which has been highlighted by practically every noble Lord who has spoken today. This month, new provisions in the building regulations came into force which, combined with the previous revision in 2002, give a 40 per cent improvement in the energy performance of new buildings. To secure better compliance with the regulations, the Government have engaged in an unprecedented dissemination programme aimed at ensuring that all stakeholders can acquaint themselves with the new requirements of these regulations, and we have introduced a comprehensive training programme for building control surveyors and a requirement for air-pressure testing. We are also conducting a comprehensive review of measures to tackle existing buildings—which are, as the noble Lord, Lord Dixon-Smith, pointed out, the majority by a long way—which will make recommendations to Ministers this summer. The committee highlighted the role of the Code for Sustainable Homes, which will set out voluntary standards going beyond the minimum set out in the building regulations themselves and signal the future direction of regulations. We have reissued a strengthened draft code in which even the lowest energy standard goes beyond regulations. All publicly funded housing will have to comply with code level 3, demonstrating strong public leadership. To encourage onsite energy generation, new homes that use micro-renewable technology such as wind turbines will gain extra code points. The noble Lord, Lord Lewis of Newnham, was one of those who said that building standards do not compare with the best European standards. Perhaps I may answer by saying that anyone who looks at this matter objectively would know that building standards are not low in the United Kingdom. Our current standards are comparable with those of other European countries with similar climates. We have signaled our intention to review the regulations every five years. Regarding his other question, on the number of installations, I hope he will forgive me if I write to him, as I do not have the figures to hand. The committee rightly raised the importance of consumer behaviour. The joint Defra/Treasury energy efficiency innovation review which was published last December, after this report was published, recognised that lack of consumer awareness represents a major barrier to the uptake of energy efficiency measures, a point that was echoed in the House tonight. In response, not only are we working to enhance our climate change communications initiative to change public attitudes to climate change at every level; we have also announced a major new initiative to strengthen consumer demand for energy efficiency. Through this, we will work closely with energy suppliers and local authorities—I hope that the noble Baroness, Lady Maddock, will at least be pleased with that—with funding of £20 million over the next two years. We will be announcing further details shortly. It has been demonstrated in other countries that the provision to consumers of detailed information on their energy use helps to deliver energy savings, and we have committed to deliver significant savings in that way by 2010. Rather against expectations, the UK secured a first reading deal during our EU presidency on the energy end-use and energy services directive. This includes robust provisions on smart metering, which we are now preparing to implement. This year’s Budget also included £5 million to pilot feedback devices, such as smart meters and other related technologies. I hope that the noble Lord, Lord Broers, who mentioned smart metering in particular, will be pleased when I tell the House that only yesterday the Environment Minister, my colleague the honourable Elliot Morley, launched the first interactive smart metering trial in the residential sector. This trial, managed jointly by EDF Energy and National Energy Action, will see 3,000 electricity and smart gas meters installed in homes over the next two years. I hope that that brief announcement counters some of the views that have been fairly prevalent in the House tonight about the Government’s response. With energy prices rising, it is more important than ever to help vulnerable consumers to heat their homes. We have increased funding for the Warm Front scheme in England, which delivers energy efficiency measures to low-income households, by a further £250 million. That brings funding to a level in excess of £800 million between 2005 and 2008. The committee rightly highlighted the potential for heat generation from renewable sources. In the climate change programme, we announced a new support scheme for biomass heat in the industrial, commercial and community sectors. The scheme will run for five years and will be worth at least £10 million to £15 million in England over the next two years. The Energy Minister, Mr Malcolm Wicks, who has been referred to in the debate, and I were delighted to come together. I was asked about the relationship between Mr Wicks and Defra. From this morning’s meeting, I can say only that the relationship is extremely good. We were delighted to announce earlier today our action plan for renewable energy in biomass, which forms our response to the Gill task force report, published last October. I am sure that noble Lords will have read that report carefully and will have taken note of the suggestions in it concerning the relationship between biomass and heat. The report, which we have largely accepted, provides a clear path forward and includes a capital grant scheme for biomass boilers, the establishment of a new biomass centre to give expert information and advice, agreement in principle to further grant support for energy crops, and a commitment to use biomass heating, wherever appropriate, in government buildings. I am sure that members of the sub-committee who produced the report will be pleased about that. The public sector has a key role, both directly through its considerable powers of procurement and, more broadly, through its leadership. We have set up a new revolving loan fund of £20 million to finance investment in public sector energy efficiency, and we will also introduce new strategic targets for the central government estate this summer. We want to see a significant increase in the level of engagement by local government in all climate change issues. This year’s climate change programme sets out a range of new measures to increase the contribution of local and regional government to our climate change goals. These include funding of £4 million over three years to roll out a new package of measures to help thousands of community groups across England to take action on sustainable development, including climate change. It is clear that we must tackle energy use in every part of the economy if we are to deliver the step change in energy efficiency to which we are committed and which the report clearly suggested we should adopt. For example, the Secretary of State and I yesterday launched a strategy to tackle the impact of the food industry on precious resources such as energy, and its contribution to climate change. The food industry sustainability strategy—or FISS—addresses all sectors of the food industry, beyond the farmgate to the consumer’s plate. It provides a framework for improving the sustainability of the food and drink industry through widespread adoption of best practice. In the past, our climate change programme has focused on energy-intensive users in the business sector and households. Noble Lords have also highlighted the importance of addressing emissions from smaller businesses. We are providing additional resources of £15 million for the Carbon Trust to expand its loan scheme whereby small and medium-sized enterprises can receive interest free loans of between £5,000 and £100,000 for energy efficiency investments. The committee and the noble Baroness, Lady Perry, in her opening speech, raised the issue of the so-called ““rebound effect””, whereby cost savings from energy efficiency lead to increased spending elsewhere, offsetting some or all of the original energy savings. Following the publication of the report and its recommendations, Defra has commissioned two independent expert studies which are about to be published. They confirm that the total rebound is likely to be of the order of 25 to 40 per cent. While that is a significant factor, it by no means negates the value of energy efficiency improvements, as some have suggested. As an ancillary finding, the models have revealed a positive impact from improved energy efficiency on productivity in the UK economy and on employment. Copies of both studies will be placed in the Library, and they will of course go on the Defra website. I shall ensure that all members of the committee receive copies as soon as they are published. The committee stressed the importance of energy research and highlighted the comparatively low level of UK funding. In last month’s Budget, the Chancellor announced a new national institute for energy technologies. This represents an opportunity to tackle key energy research challenges, to accelerate progress towards a low-carbon economy and to help ensure reliable long-term energy supply. The combined public and private investment envisaged for the institute is around £1 billion over its 10-year lifetime. I have not been able to respond in detail to all of the many points raised, but I will do my best with one or two. The question of how government should be structured to deal with the issue is obviously important and was raised in the report and on the Front Benches. Tackling climate change obviously means influencing every sector of the economy: housing, health, education and transport as well as, of course, the energy sector. The argument is over whether it is realistic to expect all of these sectors to be the responsibility of any one department or Minister. The House will know that in May last year the Prime Minister set up the Ministerial Committee on Energy and the Environment, which he chairs, reflecting the importance we attach to meeting our domestic and international targets and to securing a high level of commitment across government to effective climate change mitigation policies. Frankly, there will always be departmental divisions, whichever way responsibilities on climate change policies are split. It is clear that the Secretary of State for the Environment leads the UK’s work on reducing greenhouse gas emissions and its adaptation to the effects of climate change. However, it is important to secure a high level of commitment across government, as the important Sustainable Energy Policy Network, made up of senior Ministers, enables us to do, rather than trying to bring more and more areas of policy within the direct control of any one Minister. The question I pose to the Front Benches is this: they can criticise the present structure as much as they like, but what can I look forward to hearing proposed—perhaps in the case of the Conservative Party in about 18 months’ or two years’ time—as an alternative to deal with this issue?