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Energy: White Paper

My Lords, I add my voice to those welcoming the noble Lord, Lord Jones of Birmingham, and paying tribute to his maiden speech today in your Lordships’ House. Energy is a good example of an area in which long-term consistency of policy is critical and therefore a large measure of cross-party consensus is important. We therefore welcome the Minister, who we believe is someone with whose views we have much in common. He so rightly referred to the need for efforts in the international world, because we are a relatively small part of the overall problem. The noble Lord, Lord O’Neill, referred to China and India. The Minister also mentioned the need to work on our European colleagues towards achieving a common approach and, importantly, liberalised markets. The noble Lord, Lord Haskel, also spoke of his concerns in this area. However, my noble friend Lord Liverpool, speaking on China and India, referred to the need for us none the less to set an example. I am grateful to all noble Lords for their contributions. The noble Lord, Lord Teverson, spoke about the challenge of incentivising electricity suppliers to reduce power usage and about ““hot rocks””, a subject on which he has spoken before. The noble Lord, Lord Tanlaw, raised his special subject of daylight saving, and I reassure him that the Official Opposition’s position has not changed since we last debated the matter, when we gave very good reasons why we opposed precipitate change. The noble Lord, Lord Tanlaw, also made a good point about the dangers of pursuing biodiesel at all costs and the huge danger of the unintended consequences of that, which already include massive deforestation not only in south-east Asia, especially Malaysia—which he mentioned and is a country I know well—but in South America and elsewhere. My noble friend Lord Dixon-Smith spoke about the conflict between certain growth in the use of energy, especially in the developing world, and the vital need to reduce the emission of carbon dioxide and other by-products that are so damaging to the environment, and about the huge difficulties which we acknowledge in squaring the circle. He spoke about his three Hs—heat, hydrogen and horticulture—and about the dangers of overemphasis on biofuels. The noble Lord, Lord Hunt of Chesterton, spoke chillingly about his concerns for the very survival of the United Kingdom and of the need to think for the longer term and about lessons that can be learnt from overseas. My noble friend Lord Jenkin spoke of a continued need for clarity, and he asked the Minister to confirm the Government’s commitment to the market. He congratulated the Minister on his acknowledgement of the need for a decision this year on the nuclear question. The noble Lord, Lord Chorley, was of a similar mind to my noble friend on this issue. My noble friend Lord Jenkin mentioned the proliferation of strategies, incentives, levies, agreements, policies and proposed legislation and the pressing need for rationalisation and clarification. He also referred to the potential of the ““carbon hedge”” mechanism and his frustration that it and other measures are not being progressed to help to achieve a proper and consistent price for carbon. The noble Lord, Lord Redesdale, also referred to his concerns in this area. My noble friend Lord Jenkin went on to raise a number of very important questions for the Government. The noble Lord, Lord Brennan, reminded us of the vital importance of security of energy supply. He referred to five areas of threat to our country and he made three interesting recommendations. We look forward to the Minister’s response to those recommendations. My noble friend Lady Wilcox spoke about the importance of improving the environmental credentials of our energy industry. Like her, I am glad that the White Paper refers to the need for this to be taken into consideration. The White Paper has also mirrored the Opposition’s interim findings last year by emphasising the crucial importance of energy security. The statistics are enough to show how much of a priority this must be. As the Minister said, 30 per cent of Britain’s current generating capacity will be retired in the next 20 years, and electricity demand continues to rise. The laws of demand and supply are inexorably leading us, as the noble Lord, Lord Brennan, said, to becoming more dependent on imported energy from a very limited number of reliable sources. In November 2005, the Minister, in a previous role, warned us about an energy crisis that, "““could see factories and offices having to shut down for all but three days a week””." We were all fortunate that his worst fears were not realised, but the underlying problems, especially the longer-term ones, have not gone away. Significant increases in the price of oil on the international market have also combined with a squeeze on imports from less liberalised European markets to push up prices, so new gas interconnector and LNG facilities have come too late to prevent domestic bills rising by 35 per cent in real terms over the past seven years. Bills for medium-sized businesses have risen by 50 per cent in the past two years. The Department for Business, Enterprise and Regulatory Reform has set a target to eliminate fuel poverty—the Minister referred to that—in vulnerable households. The Government have been forced to admit that, largely due to oil price rises, the total number of vulnerable households in fuel poverty rose by around 1 million between 2003 and 2006. Perhaps the Minister can expand on the Government’s plans to tackle that. While there is scope for conflict in the short term between reducing carbon emissions on the one hand and energy security on the other, in the longer term this could, with skill and a certain amount of luck, be turned to synergy. We cannot leave it to luck. Policies that diversify supply across renewable sources and improve efficiency and the use of energy could reduce our reliance on imported energy from less reliable sources. As the White Paper recognises, improving the energy efficiency of businesses and households is the cheapest and easiest way of reducing carbon emissions, and that would also help to restrain our dependence on imported energy. The subject has been well aired today. Government guidance is, arguably, rather light, but the noble Lord’s arrival in his new post provides an encouraging message that there will be improvement. In their proposals on smart metering to which the Minister referred, the Government appear to fudge the distinction—as the noble Lords, Lord Teverson and Lord Redesdale, rightly said—between proper smart meters which send information between appliances and suppliers and much simpler real-time electricity displays which provide information in real time but do not result in any of the efficiencies associated with smart meters, such as accurate billing, early warnings for vulnerable customers and an end to expensive pre-pay meters. This differentiation may seem trivial, but there is enough doubt among the general public about the dangers of climate change and scepticism about suggested solutions that care must be taken to ensure that government statements are as accurate, clear and consistent as possible. Energywatch research suggests that smart meters, as opposed to real-time displays, can make substantial savings to customers’ energy bills. Such positive results must not be undermined by an attempt to gain green credentials on the cheap. There is much more to energy efficiency than is mentioned in the White Paper. I join several other noble Lords who would be grateful if the Minister could give us more information about what the Government are doing, for example, to achieve an improvement in international manufacturing standards and to ensure that household appliances are made with energy efficiency increasingly in mind. The Government’s energy efficiency policy gives the Minister scope to bring his considerable experience to bear. Greenpeace has referred to the inadequacy of the White Paper’s focus on combined heat and power technology, which is already being employed effectively elsewhere in Europe. CHP can help reduce carbon emissions by using fuels more efficiently. Why are the Government not fully exploring this process which could drastically improve our energy efficiency? Of course it would be hard for effective CHP infrastructure to be established without considerable decentralisation of the power grid. In their energy policy statement last July, the Government proposed a range of consultations, reviews, strategies and feasibility studies to help the development of decentralised energy. Yet, as the noble Lord, Lord Hunt of Chesterton, said, the White Paper adds little except for another consultation and some vague promises that barriers will be removed. I am sure that that was not the intention, but can the Minister tell us when the Government will be able to produce a policy that will create the conditions in which decentralisation will happen? We are unlikely ever to be completely self-sufficient in energy as a country. International trade in energy will always be necessary. Unfortunately, the lack of clarity in the Government’s energy policy has delayed the much-needed investment in new plant. These delays are undeniably leading to narrower plant margins and an ever-increasing risk of supply interruptions. Clarity is needed on the future of the carbon pricing mechanism, the support that will be available for renewables and a framework under which nuclear new build will have to operate. Without that, the investment—the importance of which the Minister referred to in some detail—will naturally be focused towards the default option of gas turbine power stations, instead of towards alternative power generation. Our dependence on imported gas will be increased, and high carbon emissions will be locked in for the life of the new plant. Diversity of supply is important and, again, government delays are not helping to ensure that energy production is grounded in a variety of technologies—which the noble Lord, Lord Chorley, explained in some detail. My noble friend Lady Wilcox has mentioned the danger of the banded renewables obligation focusing excessively on one or two technologies rather than sharing subsidies appropriately among all feasible renewable technologies. It is equally important not needlessly to rule out any non-renewable energy sources, and many different types have been mentioned today from all sides of the House. Carbon capture technology, desulphurisation plants and other mechanisms for reducing the environmental impact of fossil fuel generators were referred to by my noble friend Lord Jenkin and the noble Lords, Lord Chorley and Lord O’Neill. These are all a necessary part of the future to ensure effective diversification and a continuing ability to exploit resources, such as coal, without undue adverse environmental consequences. The Minister’s words on government action here are encouraging. The importance of energy security is clear and it will only increase as time goes on. I look forward to hearing the Minister’s response to the important points raised by noble Lords in this debate. I echo the hope of my noble friend Lady Wilcox that he will reassure us that the Government intend to introduce firmer and clearer guidance very soon.