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Annual Energy Statement

It is important that when we discuss feed-in tariffs later today we understand the impact of our policies, and that is why we have brought forward the annual energy statement—so that the House can discuss the matter in its proper context during the debate later. I am today publishing alongside the annual energy statement a consultation document on secondary legislation to provide for the green deal. It is important that we get this consultation under way as soon as possible because it will allow an expectant industry to begin planning for this vital energy-saving policy. The statement on our energy policy fulfils a commitment in the coalition agreement, and in describing the progress made and the policies under way, the statement also honours one of the coalition's principles: our commitment to open and transparent government. The consumer is at the heart of everything we do. Our decisions must ensure that the consumer is protected as far as possible from rising prices, and so we will secure our energy at the lowest cost. We will do so in the short term by promoting competition, in the medium term by insulating our homes and in the long term by steering us away from excessive reliance on fossil fuels and on to clean, green and secure energy. The ultimate goals of the Department of Energy and Climate Change are to deliver clean energy for the future and to tackle dangerous climate change. Our vision is of a thriving and globally competitive low-carbon economy with cleaner energy, more efficient homes and lower bills. Over the past 12 months, we have taken significant steps to achieve just that. On both supply and demand, we have begun to deliver key coalition commitments, starting with energy efficiency. Energy saving is now an equal priority with energy production. An economy that wastes energy cannot thrive in a high-demand, low-emissions world. Improving energy efficiency will save money and cut carbon, which is why we are creating a new energy efficiency deployment office within the Department. Our first task is to make our homes and businesses less leaky and wasteful. The Energy Act 2011, which received Royal Assent earlier this year, provides for the green deal—the pioneering programme under which businesses will install energy-saving measures in our homes and recoup the costs over decades from the energy savings. I am today launching the consultation on the secondary legislation that will allow green deals to begin next autumn, including the energy company obligation, which will support those who need the most help. Improving our buildings is vital but we must also change how we warm them in the first place. We are determined to help consumers heat their homes and businesses securely and affordably, and we will publish a heat strategy next year. We are also making it easier for people to save energy. In March, we set out the strategy and timetable for introducing smart meters, which can help consumers to manage their energy use. Furthermore, we continue to push for ambitious EU vehicle emissions standards, and are providing £300 million in consumer incentives for ultra-low emissions vehicles and further support for research and development. We are also working to secure Britain's energy supplies. We need significant new investment in power plants and infrastructure to meet future demand. In July, we published the White Paper on electricity market reform, heralding the biggest change to the market since privatisation. We are also introducing a new system of long-term contracts, to remove uncertainty and attract investment, and a new mechanism for back-up electricity generation, to keep the lights on. We are setting new standards on emissions from power stations, to ensure that they are clean, and the Treasury is supporting low-carbon generation with a floor price for carbon, to help encourage low-carbon investment in the UK. Together, the reforms will deliver secure, affordable electricity from a diverse mix of sources, including renewables, new nuclear and fossil fuels, including carbon capture and storage. Each of those energy sources will be important. They will work together in concert to deliver a reliable energy system, and over the past year we have introduced a range of policies to support them. We have published the first ever renewables road map, setting out the barriers to deployment and what must be done to deploy renewable energy at scale. We have also published a consultation on the right level of subsidy to support jobs, investment and growth. Professor Weightman's report into nuclear safety after Fukushima reassures me that nuclear can be an important and safe part of the energy mix without public subsidy. In October, as part of our work to enable new nuclear build, I published the regulatory justifications for two reactor designs. Fossil fuels will remain important. That is why we are firmly committed to carbon capture and storage, with £1 billion still available for projects in the CCS programme, despite the disappointment of the Longannet project. Promising projects have been proposed, and we are developing a streamlined selection process, which we will set out shortly. Gas will continue to feature strongly in our energy mix, and our policies are designed to allow new gas plant to be built. I welcome Ofgem's proposals to sharpen incentives for reliable gas supply. We may need further measures to ensure that we are ready for low-probability, high-impact events. I am asking Ofgem to report to us by next spring on any such measures. We are improving the technical foundation of our energy security. Earlier this month, we laid the statutory security of supply report before Parliament, which sets out future supply and demand forecasts, and discusses risks and drivers. We are also making it easier for new nationally significant energy projects to be delivered. In July, this House approved the national policy statements for energy infrastructure, against which major energy projects will be assessed. Developers can now have greater certainty about how applications for consent will be considered and absolute certainty on when decisions will be made, with statutory time scales to ensure investor confidence. Our actions will maintain the diversity and security of our energy supplies. We are working hard to ensure that they are delivered at the lowest possible cost. In a world of volatile fossil fuel prices—we all know about the events in the middle east and Libya—those objectives complement each other. We believe that the policies we have introduced will deliver the best value for consumers, as we move towards a cleaner energy future. However, as we embark on the transformation of our energy system, we must take people with us. That is why I am today publishing an assessment of prices and bills, and the impact of our policies. Overall, we anticipate that rising world gas prices will push up bills for both gas and electricity, but our policies will moderate that rise. By 2020, we expect household bills to be 7%—or £94—lower than they would otherwise be without our policies. Moreover, bills will be lower during this Parliament. Britain's homes will be cheaper to heat and to light than if we did nothing, in this Parliament and in the longer term. Those savings will result above all from our energy-saving policies and from market reform. In addition, we decided to fund the renewable heat incentive and carbon capture and storage commitments from general taxation, rather than from planned levies. To sum up again, rising global fossil fuel prices and decades of under-investment will mean that prices for energy will rise in the UK, just as they will elsewhere. We cannot control global gas prices, but we can, as a Government, soften the blow. Prices and bills are forecast to rise, but we can ensure that they rise less than they would otherwise have done. We want to leave a fairer energy legacy than those before us did. Between 2001 and 2009, fuel poverty doubled. The warm home discount and the affordable warmth part of the ECO, on which we are consulting, are targeted at the poorest and most vulnerable households. The warm home discount will support up to 2 million homes each year, helping more than 600,000 poorer pensioners, with £120 off their energy bills this winter. Other vulnerable people will also be eligible for a rebate. That discount scheme is worth two thirds more than the voluntary scheme that operated under the last Government. The Warm Front programme helped 130,000 households last year, providing advice and installing heating and insulation, with a further 90,000 set to benefit over the next two years. As it phases out, the affordable warmth part of the ECO subsidies will phase in to replace it. We are also helping consumers more generally to take advantage of a competitive energy market. Consumers could save up to £200 by shopping around for the lowest online rate, but last year fewer than one in five households switched suppliers. We are making it easier and faster to switch, and we have launched a campaign to encourage consumers to check, switch and insulate to save. We are also mindful of the impact on businesses. Earlier this year we published our proposals on the simplification of the CRC—carbon reduction commitment—energy efficiency scheme and for the new climate change agreements. We are committed to simplifying the regulatory burden on industry, while driving behaviour change to improve efficiency and reduce emissions. Lower levels of energy efficiency savings mean that our policies will typically have a larger impact on energy bills for businesses. By 2020, policies are estimated to add 19% to the average energy bill of businesses that are medium-sized energy consumers. For large energy-intensive users, who are more exposed to fossil fuel price volatility, that figure is between 2% and 20%. It is important that these industries play their part in the transition to a low-carbon economy, but it is also important that they remain competitive. That is why we are working with the Department for Business, Innovation and Skills and the Treasury to announce measures before the end of the year to support those energy-intensive industries whose competitiveness is most at risk. The energy sector is a vital part of our economy. Energy industries employ 173,000 people, contribute nearly 4% of our gross domestic product and provide more than half of our industrial investment. More than 51,000 companies in Britain provide low-carbon and environmental goods and services. Exports are now £11.3 billion a year—up 3.9%. Last year, nearly 4,500 new jobs were created in the sector, which grew by 4.3%. We expect that our policies, like the renewable heat incentive, will strengthen supply chains across the country, bringing jobs and growth. The green deal alone will kick-start at least £14 billion of investment in the decade to 2022 and support at least 65,000 insulation and construction jobs by 2015. We want to ensure that young people today can play their part in the industries of tomorrow, so we are supporting green apprenticeships to build the skilled work force we need to deliver the green deal. In conclusion, between now and 2030, our relationship with energy will change fundamentally. We have to build a new energy portfolio—one that is equal to our changing needs and our ambitious carbon targets. It has to be supported by a new consensus. Helping consumers to understand their energy costs, and how our policies affect them, is key. The decisions we take now will affect the way our energy is delivered for decades to come. I commend the statement to the House.