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Energy: Low Carbon Transition Plan

My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State for Energy and Climate Change. The Statement is as follows: "All of us in this House know the gravity of the challenge that climate change poses. We know that to rise to the challenge will mean comprehensive changes in our economy and our society. We are one of the few countries to exceed our Kyoto targets; we are now the leader for offshore wind; and we are the first country in the world to legislate for carbon budgets. But the proposals published today are the first time we have set out a comprehensive plan for carbon across every sector—energy, homes, transport, agriculture and business. A decade ago the carbon impact of most policies was not even measured. Last year, this House passed legislation for legally binding carbon budgets, measurable caps on carbon. This was a dramatic change in approach. But we need to go further because every part of government needs to be responsible for meeting these budgets. So I can announce that not just the country as a whole, and not just the biggest departments, but from today, every department has its own carbon budget. Having been the first country in the world to set legally binding carbon budgets, we are now the first country in the world to assign every department a carbon budget alongside its financial budget. The plan sets out how we will meet the carbon budgets set out by the Chancellor for an 18 per cent reduction in today’s levels by 2020, or 34 per cent compared to 1990, part of the necessary steps we have to make to get a global deal this December. Let me announce to the House how we make the 459 million tonnes of carbon savings to meet our carbon budgets. In agriculture and waste, there will be a 6 per cent cut in emissions—20 million tonnes—by the budget period centred on 2020, made possible by new policies on waste and new commitments on farming. In the transport sector, there will be savings of 14 per cent by 2020, or 85 million tonnes, as set out in my right honourable friend’s sustainable transport strategy published today. This includes plans for electrification of rail, tougher car and van emission standards, and the new £30 million fund to get low-carbon buses on the road in the next two years. We are also doing more to bring about the transition to electric cars, with new funding making possible a recharging infrastructure in up to six cities. And across business and the workplace, we show how we can make 41 million tonnes of savings, or 13 per cent on today, including with the carbon reduction commitment being introduced next year. The most important reductions to meet our carbon budgets come in the way we generate and use energy. In the power and heavy industry sector, we show how emissions will be reduced by 22 per cent, or 248 million tonnes. With North Sea gas production declining, if we carried on with business as usual, over the next decade our imports of gas would double. On the basis of the low-carbon choices I announce today, our forecast is that, rather than double our gas imports, they are kept down to 2010 levels for the whole of the following decade. So with more low carbon, home-grown energy, we avoid an ever-increasing dependence on imports. I have listened to representations on renewable energy and I have concluded that for reasons of energy security and climate change, it is right to go ahead with plans for 15 per cent domestic renewable energy by 2020. In the final decisions of the Government’s renewable energy strategy that I have published today, we show how we can secure around 30 per cent of electricity from wind, marine and other renewable sources. We are also publishing the shortlist of Severn tidal schemes. I believe it is right to go ahead with our plans for new nuclear power stations. We will publish our national policy statements on nuclear and other energy issues in the autumn, and the industry is planning at least 12.4 gigawatts of new stations, more than current existing capacity. Alongside the most environmentally stringent coal conditions in the world, the Government have proposed up to four carbon capture and storage projects and we have proposed legislation in the next Session of Parliament to make it happen. Let me be clear. I believe that when it comes to the future of energy in Britain, clean coal has an essential role to play. Renewables, nuclear, clean fossil fuels, as this plan sets out, are the trinity of low carbon and the future of energy in Britain. What would be fatal is to pick and choose between them. All of them should be part of our future energy mix. In total, our plans show we will get 40 per cent of our electricity from low carbon energy by 2020 and more in the years afterwards. To deliver the changes in our energy supplies between now and 2020, we must make it easier for investors to turn low carbon projects into reality. Having tackled rules on planning, I believe we now need to do more to address the issue of grid connection. So I am today announcing that I will exercise the reserve powers provided under the Energy Act 2008 for government, rather than the regulator, to set the grid access regime. The new rules should be in place within 12 months and, instead of waiting for over a decade for grid connection, as can happen now, we can get the fast access to the grid that renewable projects need. We also know that as we generate power in a cleaner way, we also need to use energy in a smarter way in our homes. In total, in the plan, we show how cleaner sources of heat and better use of energy can cut emissions from our homes by one quarter compared to today and save 57 million tonnes. We must transform the information on energy use available to all of us. So, as well as putting in place new funding today for smart grids, we are proposing to roll out smart meters to 26 million homes by 2020. We need new incentives, as well as better information. The plan makes clear that, on energy efficiency, we need a house-by-house, street-by-street transformation, like the transition from town gas to North Sea gas in the 1970s. Over the next decade, our plan sees families not having to pay up front but being able to spread the costs over many years, paid for out of the savings on their energy bills. Today, we take the first steps with the first pilots of the new pay-as-you-save scheme. As well as information for individuals and the right incentives, we know from the Transition Towns movement the power of community action to motivate people. So, we will provide £500,000 each to fifteen areas of the country for people to come together to trial the newest technologies and be beacons for how other communities can cut their carbon emissions. From next April, I can confirm that individuals and communities alike will be able, for the first time, to generate their own renewable power and sell it back to the grid with guaranteed feed-in tariffs. The details of the rates and levels on which we are consulting are set out today. We need reforms not just in the way we produce energy and in how we use it, but also how it is regulated. In the energy world of today, unlike 20 years ago, the job of the regulator is to help deliver on our climate change commitments because failure to act on this now will store up greater cost later. So, I propose to make changes to Ofgem’s principal objective. For the first time, reducing carbon emissions, as part of protecting the future consumer, will be explicitly set out in its guiding mission. Competition is essential but we know from the experience of prepayment meters that it has not delivered for all consumers. So I will also make it clearer in Ofgem’s principal objective that, when competition does not deliver, it is Ofgem’s duty proactively to stand up for consumers up and down this country. With greater expectations of the regulator should come greater powers when it needs them. So I also propose to legislate to provide Ofgem with new tough powers to take action where it believes there is anti-competitive practice in the generation of electricity. Strong regulation is all the more important given the upward pressure on energy prices in the coming years. Making the energy transition will have costs but, for households, they are significantly offset by savings on energy efficiency and reduced energy demand. Today’s plan will not increase average household energy bills by 2015, compared to now. For households in 2020, the plans today will mean an average of 6 per cent on domestic bills, or £75 a year, compared to today; and, including all previous policy announcements on climate change, the figure is 8 per cent. Given the costs of transition and the priority of tackling fuel poverty, I believe we need to do more to protect the most vulnerable consumers. So, today, I propose to reform the system of social tariffs. At the moment, more than 800,000 households receive discounts and other help with their energy bills. It is part of a voluntary agreement with the energy companies. I propose that after the voluntary agreement ends in 2011 discounts for the most vulnerable will continue not from a voluntary arrangement but through legislation for compulsory support from the energy companies. We will legislate to increase the amount spent and intend to target new resources at the most vulnerable consumers, particularly older, poorer pensioners. As we make the transition to low carbon, we must do so on the basis of energy security and fairness, and we must also seize the industrial opportunities using the money the Chancellor has allocated in the Budget. We have set out plans for the carbon capture and storage industry and, today, new investment in how Britain can lead in nuclear manufacturing. In renewables, Britain has half the usable tidal energy in Europe. Today I am committing up to £60 million to build our wave and tidal industries for testing new technologies, expanding port access and deployment in key parts of the country. We also need to nurture the offshore wind industry, where we have a unique resource. I am making available up to £120 million to support the growth of a world-leading offshore wind industry in Britain. As well as supporting the demonstration and testing of offshore wind, the money will be used to attract offshore wind manufacturers to the UK. We estimate that these investments will help nurture industries that can support hundreds of thousands of jobs—investment we can make only today because, even in the tough times, we made the choice to invest in the economy of the future. Climate change is the moral issue of our time. In five months, the world must come together at Copenhagen and follow through on the commitment of world leaders last week to stop dangerous climate change. Today we show how Britain will play its part. Our transition plan is a route map to 2020. It strengthens our energy security. It seeks to be fair in the decisions we make. Above all, it rises to the moral challenge of climate change. This is a transition plan for Britain. I commend it to the House". My Lords, that concludes the Statement.