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Energy: White Paper

My Lords, from the Liberal Democrat Benches, I also welcome the Minister and congratulate him on his first speech. It was much longer than many of us are allowed in our maiden speech but was delivered very well indeed. It was not entirely uncontentious—as he suggested, any speech on nuclear power will divide not only the House but each of the groups here. Like the noble Baroness, Lady Wilcox, I live in Cornwall. Although the Minister probably will not remember, I met him at a Liberal Democrat conference where he was a guest. I mentioned to him that I come from Cornwall and he efficiently and knowledgeably came out with a number of major economic and business players in Cornwall whom he knew. It was most impressive. I am sure that during his tenure in the Government he will continue to keep that connection with the far south-west which is so important. This morning I was also impressed because it looked like there had been regime change on the government Benches. However, the noble Lord, Lord Evans, quickly came in to make sure that order was restored and the ancien régime was there for a little longer. It is good to have a little history on subjects of this sort. I went to a school in Essex, although it is now in London as a result of the boundary changes in the 1970s. I remember that during the days of smog I used to come back towards London and that in the winter we were concerned about energy cuts. The big question on energy was how many days out we would have during cold snaps when we would have no energy supply whatever. That changed very soon, and in the 1970s the question was not capacity but the three-day week and the battles between the electricity suppliers and the unions that disrupted our electricity supplies. In the 1980s, during the regime of the noble Baroness, Lady Thatcher, we had privatisation and the depoliticisation of energy. The Department of Energy disappeared into the Department of Trade and Industry—I think the noble Lord, Lord Parkinson, was the last Secretary of State for Energy—and energy was more or less forgotten about by the political class and Parliament. There were no more issues because the private sector dealt with it. As a result of privatisation we had major decreases in energy prices in the 1990s and a good outcome was that fuel poverty decreased. I give the Government credit for their work in reducing that further. As the statistics show, electricity prices in real terms decreased by 30 per cent from the beginning of 1990 to at least 2004. Although they have risen substantially, electricity prices in real terms are 20 per cent less today than they were in the early 1990s. However, in the past couple of years—indeed, in the past 12 months—energy has returned to the front pages in terms not only of climate change but of energy security as well. Not only are climate change and energy security big news; every time we read scientific papers or have further meetings of the climate change committee, the predictions about the problem get worse. No doubt the same will be true of the Bali conference later this year. The issues are greater than we expected. The International Energy Agency has predicted that there will be an oil crunch in the next five years. As the Minister said, this is not only a live and important issue—it is becoming an increasingly dangerous global issue. I was pleased that the Minister specifically mentioned energy savings, which is dealt with in the first major chapter of the White Paper. Compared with the marvellous new renewable technologies, nuclear power and the array of things in the White Paper, energy savings is one of the less sexy areas—but it is a key area of energy policy. Far greater savings are possible than we sometimes credit. A number of studies, particularly in Scandinavia, show that energy saving is not only good in itself, it has a negative cost. Energy saving gives a positive payback. As it does not involve major investment or real cost, we have to concentrate on it. However, the White Paper does not say how that is to be delivered. From my economics background I know that demand for electricity and power generally is very inelastic, partly because of the current abundance of power and its ease of use. Even if we change prices through cap-and-trade systems, carbon taxes or whatever, households will be slow to change how they work. It is therefore very important to change regulation and standards and that whole approach. Many of the product standards which the White Paper talks about are not decided here in Whitehall but are single market issues to be decided by the 27 member states in the European Parliament and the Commission. I shall be interested to hear the Minister’s view on what solidarity he expects among business department Ministers regarding how the agenda can be moved forward relatively quickly, in contrast to the sometimes slow decision-making in Brussels. One area really concerns me. Although one would never want to say that a government document is naïve, one paragraph in it—and in the Minister’s Statement—says that energy supply companies will have to become energy services companies and that we must persuade them that, rather than wanting to sell energy, they must want to balance energy sales with energy savings. The White Paper says that we will need an innovative policy for that. I read that as a euphemism for, ““We need something but we haven’t worked out what the heck it could be. Somehow we need to persuade energy companies to de-sell their products””. As energy is important for security, that is rather like putting al-Qaeda in charge of homeland security. It is trying to persuade some of the largest global corporations to do exactly what they are trying not to do. From my business and industrial experience I know that, during the 1980s and 1990s, we learnt to concentrate on our core products. Energy companies are about delivering energy to consumers as effectively as they can with the least number of interruptions and at the lowest cost. I cannot see how a change in the legislative regime would, as the White Paper suggests, make them become a major part of the solution. We have to make sure that they are efficient and competitive suppliers, but at the household end—the demand side—we need to bridge the gap between initial capital expenditure on energy saving and the downstream benefits once that investment has taken place. It must be far easier to square that circle by financial engineering—loans or whatever—than by trying to persuade big global corporations to be what they are not. Let them concentrate on what they are good at. The Minister mentioned renewables, as did the noble Baroness, Lady Wilcox. This is clearly a key area for all sides of the House. The latest available figures, from 2006, show that we are now 26th out of 27 EU member states in terms of the proportion of our energy that is renewable—it is 1.7 per cent. The only country which is behind us is Malta, where the proportion of energy generated from renewable sources was zero in 2006. Like the noble Baroness, I ask the Minister how we will practically reach a position where we play our full part in meeting the European Union’s objective for 2020, which is a mere 13 years away, of generating 20 per cent not just of electricity but all energy from renewable sources. The UK will clearly have its own allocation as part of meeting that target. While I applaud the target, I fail to see how we are going to do it. The White Paper does not mention it. One aspect of consumer power in this area is smart meters. The White Paper gives a detailed explanation of its approach to smart meters, but the two-stage approach that it suggests, initially involving making available cheap, clip-on smart meters—which are not really smart meters at all—seems more a gimmick than something that is useful. They will be introduced and they will be expensive, but they measure only electricity; they cannot measure gas, which is more important in households; they will not convert consumption into a monetary value; and their readings are not easy to display on a TV or a computer in the household. I strongly urge the Government, therefore, not to worry about that aspect, but to take the slightly longer-term view and move on to real smart meters, where the technology already exists. We are obliged by the electrical services directive to start to implement real changes in this area by May 2008. I humbly suggest to the Minister that the easiest approach is for the Government to mandate any meter changes from May 2008, thereby tying in with the European legislation, to be proper smart meters that can measure all forms of energy used in the household, show pricing and can be displayed on a screen that people can see and use every day. That would bring power back to households to make sensible decisions about energy. I again congratulate the Minister on his speech. As I said, he mentioned Cornwall, to which I might perhaps give one plug. We have a renewable technology of our own, hot dry rocks, which is geothermal power. It has not been very popular with the Government, but it could offer that bedrock of electricity generation that we all desire from renewables. I would like at some point to speak to him further about that. I hope that it will be included in the Government’s renewables portfolio. His appointment comes at a time when the United Kingdom can be major player in Europe and he can help to save the world from the effects of climate change. We on these Benches offer him every success in that.