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Energy Bill

My Lords, much can be welcomed in the Bill but, as I think Ministers and Whips have realised by now, if I speak from these Benches rather than from the Benches behind them, I am not entirely at one with government policy on a number of issues. After the wide-ranging White Paper and the promise of the Climate Change Bill, to which we are all committed, this Bill is rather disappointing. So far as the climate change targets are concerned, not much in the Bill will bring us any closer to achieving the demanding trajectories which the original Bill set for us and which, as the noble Lord, Lord Hunt of Chesterton, said, may be very conservative. I put this into a context that is slightly broader even than the one that has already been touched on. Oil prices, at $130 a barrel and rising, will indeed drive energy efficiency and a switch from carbon. However, the effect of that rise, particularly on the poor, to whom the noble Lord, Lord Palmer, has just referred, can be absolutely devastating. Fuel poverty is, as he says, rising inexorably. The Bill does not contribute to resolving that dilemma. The rising cost of energy might be desirable in terms of climate change and for fuel security and a switch from carbon, but it has enormous distribution effects on the poor. Many of the measures which government and the market direct at more environmentally desirable outcomes—such as nuclear power, renewables, green taxes or an alteration of the market structure to provide a higher proportion of green energy—disproportionately hit the poor. There are no off-setting measures. The Bill does not change that, but it and government policy could move a little way towards squaring the circle. Before I go any further, I had better declare a few interests. I am chair of the National Consumer Council, which will merge very shortly with Energywatch, which has been referred to, and I have a number of interests in fuel poverty and combined heat and power, all of which are recorded. Even when I was in the Government, I had certain misgivings about government policy. Energy policy seems to have two aspects that are contradictory and do not add up to a coherent whole. If I may exaggerate slightly, on the one hand we have a rather Stalinist obsession with grandiose, big-scale projects, and on the other we have an obsession with maximising the competition, primarily to ensure that the average price reduces rather than taking into account the distribution effect on the very poor. We therefore have a combination of Stalinist economics and Ronald Reagan economics. This mixture has not delivered on any of the four main targets for energy policy, which include our social duty to reduce fuel poverty, environmental sustainable energy and fuel security. We need some big projects and I am in favour of the provisions in this Bill for the Government’s commitment to new nuclear build, even though it will not really affect the balance until the 2020s. I am, on balance, against another big project, the Severn barrage, but I am persuadable even on that. But what the Government need to focus on rather more than large-scale power stations and large-scale projects is the area of decentralised energy, distributed energy and local production. Before I go on to that, my main point relates to fuel poverty, and the noble Lord, Lord Palmer, has spelt out the statistics and the progress which has been so tragically reversed in the past few years as prices have doubled. Government policy has not responded. Indeed, in a sense, it has gone in the opposite direction. The Warm Front programme has been cut; the new version of the EEC, called the CERT, now only has 40 per cent gearing to the poorest rather than 50 per cent, although it is in total an increase; and the increased focus on social tariffs, which I am gratified to see Ofgem is now taking seriously, has yet to produce any results in terms of giving better options to the very poorest, both within companies and by switching between companies. I do not blame the regulator for this. The regulator has probably improved its focus on both the environmental and social outcomes in the past couple of years or so. While I have often criticised Ofgem, I think the real problem is the direction and framework that the Government give to Ofgem. Ofgem’s primary duty is still far too narrow, as others have said, and we need to interpret the sustainable development duty that was given to Ofgem in the 2003 Sustainable Energy Act—and it took a bit of argument with the Minister’s predecessor to get that duty in there in the first place—but it has not really altered the primary focus of Ofgem’s activity because it is not a direct instruction from the Government. We need a renewed focus on delivering social tariffs; we need extra resources into programmes like Warm Front; and we need social housing expenditure under the successor to Decent Homes to be more focused on energy-efficiency improvements. All these will require changes in the role of Ofgem and in government funding. I am very keen on smart metering, which is referred to in this Bill and which will be delivered, though on a slightly slower timetable than I think is possible and necessary. I also assume that this will subsume progress on the outrageous premium on pre-paid meters which is paid, by and large, by some of the poorest in our society. As well as ensuring that the social objectives of energy policy are re-emphasised, the environmental ones—particularly the commitment to renewables—also need to be underlined and strengthened. The European target, as others have said, looks pretty unattainable on present policies and trends. I am sitting on your Lordships’ Sub-Committee B, which is looking at these matters. I do not want to pre-empt its decision, but it certainly looks at the moment as if that renewables target is not attainable. Indeed, in some ways, we seem to be going slightly backwards when you look at what is in the pipeline. On wind, for example, we have the combination of both government and big business decisions recently. There was the Scottish decision not to back the big wind farm up there, and a major oil company, which I will forbear from mentioning in my proximity to the noble Lord, Lord Oxburgh, has apparently pulled out of the Thames Array. Both those decisions are disappointing. Of course, the incentive system for renewables depends very heavily on the ROC process. ROCs have had some success and it is an attractive process for the big operators which trade within the ROC market. But we are still at around 2 per cent of renewables. Germany has nearer 20 per cent and Denmark twice that. We have a solely ROC-based incentive; they have feed-in tariffs. I know correlation is not causation, but I think the Government need to have another look at what is being proposed as an equivalent to a feed-in tariff. I appreciate that some other relatively successful countries, like Spain in relation to wind power, have market-based systems. We need to look at the whole picture but, in the area of relatively small-scale companies—not only microgeneration but somewhat bigger than that—which are unlikely to be playing in the ROC market in the long term, the certainty that a feed-in tariff gives is more likely to bring online the kind of technology at a local level that those companies will be most interested in. All sorts of technology—local wind, solar, anaerobic digestion, farm-based or community-based biogas—can be much more efficiently and certainly delivered in the light of a tariff which is guaranteed for a period of time. The economic and environmental benefit of this can be pretty substantial. We have virtually no market in biogas in this country. Germany has over 3,000 installations and they are locally based. They use feedstock, which is waste locally generated and locally delivered, and even the second-degree waste can be reused as fertiliser or fuel for the vehicles delivering the waste in the first place. So you have a benign cycle which does not impact on the rest of the economy and certainly does not deliver increases in carbon emissions. We need, in general, to look at more decentralised energy, CHP-based and renewables-based in particular. There are costs to the grid, as the noble Lord, Lord Oxburgh, has said, of connecting all these, and there could be local networks, both in relation to gas and decentralised energy. If we are worried about security of supply—and we must be obsessively worried about the level of carbon emissions—then the role for decentralised energy must be given greater attention by the Government and by the regulatory framework which they impose on the regulator and on the industry. Although these things are only touched on briefly in the Bill, we ought to be taking the opportunity to develop them further in proceedings on this legislation. I will certainly support or bring forward amendments relating both to fuel poverty and to feed-in tariffs for renewable energy, and I would think that around the House there was support for extending the scope of this Bill, many of whose provisions, I now reassure the Minister again, I fully support.