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Energy Providers

The hon. Member for Northavon (Steve Webb) and I have discussed his interesting proposal for super-smart meters, but I agree with my hon. Friend the Member for North-West Leicestershire (David Taylor) that the danger arises if one applies the prisoner's dilemma theory to that bright idea. It may well be the case that all the meters would switch to a single supply at the same time or, alternatively, there would be a constant, chaotic switching, because perfect information about a market would be available. [Interruption.] Indeed, markets operate only on the basis of imperfect information, as the hon. Member for Northavon knows from his studies, so there would be a problem. I would prefer to characterise meters as smart, smarter, and super-smart according to what goes into them and what they can do. It is not just a question of giving a real-time reading, so that someone's energy supply is under their control to a far greater extent. People should be able to read the meter by getting it to deliver a signal either via computer or to a remote reading facility, so that they are not waiting at home all day for someone to come and read a clockwork meter at 3.30 pm, when they said that they would do so at 9 am. It is a question, too, of the extent to which meters are two-way, incorporating energy generation as well as energy supply, and can do things such as responding to dynamic demand in the household—switching off devices when they are not needed—thus reducing the cost of supply. When we make decisions about smart meters—it is urgent that we do so—we must ensure that those meters are rolled out in the best possible way. We need some form of area franchise, rather than each company looking after their own meters. It is important that we get smart meters right, otherwise we will simply install a new generation of clockwork meters to replace the old generation. Given the radical change in the way in which energy will be supplied in future, it is essential that meters are up to the task of making sure that the different form of supply can be properly mediated by householders. We have to make those changes, but the need to reinvest in our energy economy in a substantial way poses a dilemma. Unless one suggests—I do not—that all the energy supply companies should be nationalised immediately, it is extremely likely that that investment in all those different forms will largely be down to the energy companies, and it is essential that they can make that investment. It is important, too, to place that new investment in the context of the long-term prospect of high energy prices, regardless of the volatility of the market. Under those circumstances, I wonder whether the idea of a windfall tax that simply gives people money to become competitors in getting expensive energy supplies and to give the money back to energy companies so that they can provide them with more expensive energy supplies is necessarily the smartest way to go forward. I suggest that when we are looking at the renewal of our capacity, we should approach it in different ways. Renewing our power plants will be achieved by means of different devices. We will have to introduce a substantial amount of renewables to replace existing power stations. In traditional power stations, we will have to introduce different ways of ensuring that their output is efficiently captured and that the emissions are properly controlled. Carbon capture and sequestration means combined heat and power and measures to ensure that the use of the fuel is efficiently discharged for the production of electricity. With reference to the grid, I am attracted by the elision in Chinese of the words ““danger”” and ““opportunity””. Will we say to energy suppliers, ““We ought to be reorganising and restructuring the grid, but we will reorganise it in the same way as it was previously organised,”” when we know that we are moving into an energy economy of distributive energy, with households producing electricity and that going into the grid in ways for which the grid was fundamentally not designed? The grid is essentially a spine system going down the country, linking very large power stations with what one might regard as dumb terminal users. One is reminded of the statement that the chief executive officer of IBM made in the late 1940s, when he was asked how many computers he thought the world would need. He said about six, on the basis that there would huge computers with long terminals with dumb ends on them. That is not how the energy economy will work over future decades. The grid must be resupplied, so that it works for renewables and decentralised energy. Should it go on land or sea? Can we envisage the connection of offshore wind with this country and interconnections with other countries, serving also as a grid device for distributing energy round the country? Can we make an opportunity of the dangers in such a way that the companies supplying energy reinvest in the grid, in power stations and in meters to make them fit for purpose and for the way in which the energy economy will run in future? That brings me to the way in which we should approach those energy companies. In the new energy economy, with the sort of goals that we have heard about today, it is absurd that we should continue to envisage energy suppliers being required in future to provide each and every one of us with as much energy as they can at the highest price they can, and that that is how they will make their money. Yes, of course energy companies must make money for the tasks of investment and supplying energy in future, but a far better paradigm is to develop ways for them to cease to be energy supply companies and to become energy service companies engaged in contractual arrangements with commercial or domestic customers. The energy supply companies would invest, along with the customer, in saving energy, installing energy production and energy-efficient devices, making sure that the energy provided is the smallest amount possible and that the proceeds that arise as a result of that contract saving money are split between the householder or company and the energy supply organisation. The opportunity and the danger come together in a new paradigm for how we deal with our energy supply companies, first, in the interests of arresting climate change; secondly, to the benefit of our energy security by ensuring that we use less energy and use it far more efficiently; and thirdly, by re-equipping our energy infrastructure to deal with the problems of the 21st century, rather than the 19th century, which it appears at present to be designed to do.