Dynamic Demand Appliances Bill [HL]
12:34 pm

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Lord Redesdale (Spokesperson in the Lords (Energy), Environment, Food & Rural Affairs; Liberal Democrat)

My Lords, I beg to move that this Bill be now read a second time. I must apologise to those people wandering into the Chamber that the Title of the Bill gives absolutely no indication of what it is about.

The purpose of this Private Member's Bill is to enable a certification mechanism and market incentive for intelligent electrical appliances that are able to sense power shortages on the electricity grid and alter their consumption accordingly.

Dynamic demand appliances contain a low-cost electronic microcontroller. This listens to the mains hum, which runs at a frequency of around 50 hertz. The signal can be detected through every plug socket connected to the national electricity supply. Through this signal, the dynamic demand appliances can sense whether the National Grid is under stress and adjust the time at which they use electricity. The technology is suitable for appliances that already switch on and off during the day on a "duty cycle", such as domestic and industrial fridges, freezers and water heaters.

Millions of such appliances acting together would smooth out demand for electricity. This could allow for greater integration of variable sources of renewable energy, such as wind and solar. Such considerations are critical to long-term planning for the national electricity system if we are to achieve the high penetration of renewable energy necessary to meet and exceed Kyoto Protocol targets.

Use of dynamic demand appliances would also cut carbon emissions by reducing the need for back-up generation on the electricity system. Currently, some power generators run at less than their full output so that they can continuously respond to changes in our electricity demand. Such generation is generally less efficient because it has to run partly loaded and at variable rate, resulting in additional fuel use and carbon emissions. Academics are currently working to calculate the likely carbon savings associated with dynamic demand. Best estimates so far indicate that this may be in the order of 2 million tonnes of carbon dioxide per year. To put this in context, 2 million tonnes of carbon dioxide is equivalent to approximately one-quarter of the amount that would be saved if the Government met their 10 per cent renewable energy target.

The company which operates the National Grid currently spends around £80 million per year to commission the type of back-up service that dynamic demand could supply. Dynamic demand could therefore significantly reduce the costs of running the national electricity grid.

Early computer simulations also indicate that dynamic demand could provide significant system stability on the electricity grid by being highly responsive to sudden loss of generation, such as the failure of a major power plant or the tripping-out of a nuclear power station. In times of system crisis, dynamic demand appliances sense the system conditions and automatically defer their electricity consumption.

This is one of those simple yet powerful technologies with a huge potential to help curb climate change. As customers, we would notice no difference in the performance of our domestic appliances, yet our refrigerators and water heaters would be providing a continuous stabilising service to the electricity grid, reducing our dependence on inefficient back-up generation and preparing the system for variable renewable energy sources. This is an important point because it negates any need to educate the consumer in the use of appliances.

A laboratory test of a dynamic demand refrigerator and freezer is currently underway by the independent appliance testing company Intertek. This test has been sponsored by the Market Transformation Programme of Defra to assess the effect of dynamic demand operation on the performance of the appliances and to ensure that food safety is maintained. I look forward to development of the testing programme into a field trial, to verify the findings of computer simulations of the aggregated effect of many dynamic demand appliances operating together.

By supporting dynamic demand technologies through this Private Member's Bill, we will help to create the conditions conducive for this technology to become a market reality. We will also greatly enhance opportunities to develop UK expertise in demand-side energy management. This has a significant part to play in reducing greenhouse gas emissions and is an area of technology development that has global significance, especially in rapidly developing economies such as India and China.

It is worth noting that a House of Commons Private Member's Bill containing a clause that deals with dynamic demand passed its Report stage on Friday, 17 March. That Bill—the Climate Change and Sustainable Energy Bill—would require government to identify and address barriers to the introduction of dynamic demand on the electricity grid.

On Monday, 20 March, I hosted a meeting in the Attlee Room—I commend the Catering Department for a fine lunch—bringing together representatives of Ofgem, National Grid, DTI, Defra, the Market Transformation Programme, the Energy Savings Trust, appliance manufacturers, electronic component manufacturers, energy suppliers and academics. We discussed routes to market for dynamic demand. Participants identified the need for a reward system to incentivise the redesign of electrical appliances to provide valuable demand-smoothing services to the National Grid, with the significant public and environmental benefits that I have already outlined.

Several companies have made forays into exploring the technology and its potential benefits, yet none can justify the investment needed to realise the benefits of dynamic demand technology at a national level, unless a financial incentive system is in place. Conversely, while the grid operator would benefit from the services, it would do so only once sufficient dynamic demand appliances are in operation. Provision of an incentive scheme, without public policy intervention, is therefore highly unlikely. It is that need that this Private Member's Bill seeks to address.

Before I discuss the clauses in detail, I have three questions for the Minister to see how the DTI could help in developing dynamic demand. Could a field trial, involving appliances in people's homes, be undertaken? That would help us assess the exact effect on the power grid that an aggregation of appliances would have. Secondly, could the DTI fund computer modelling of the power system to assess the precise benefits in terms of carbon dioxide emissions? Thirdly, could it fund modelling to assess the benefits of many dynamic demand appliances in helping to smooth the variable power from renewable energy resources? So far, this work has been undertaken by volunteer organisations whose funding is coming to an end.

I turn to the Bill. The first clause seeks the establishment of a standard for dynamic demand appliances and a certification process for this standard. The clause also makes provision for the establishment of an incentive mechanism to reward appliance manufacturers for making dynamic demand appliances and introducing them on to the UK electricity grid. The second clause defines the term "dynamic demand appliance". I shall now explain each of the clauses in greater detail.

Proposed new paragraph (a) in Clause 1 requires the establishment of a dynamic demand appliances standard for electrical appliances. A standard is necessary to ensure that all dynamic demand appliance controllers behave in a way suited to the needs of the National Grid, achieve the desired demand-smoothing effect, support carbon efficiency and maintain proper operational standards such as food safety. A published standard will also help to encourage manufacturers, competition and innovation to meet the criteria.

Proposed new paragraph (b) requires the establishment of a certification process. This would allow for independent testing and verification of manufacturers' claims against the agreed standard. The certification process should ensure that dynamic demand appliances fulfil system requirements, deliver on-system and environmental benefits, and provide full accountability for the financial incentive mechanism.

Finally, proposed new paragraph (c) requires the establishment of a dynamic demand incentive mechanism, whereby manufacturers may benefit financially for each dynamic demand electrical appliance certified and connected to the UK electricity grid.

At the event I hosted on 20 March, an electronic component manufacturer indicated that the likely additional cost of introducing a dynamic demand controller would be in the region of £3 to £4 per appliance. A fridge manufacturer said that while this seems to be a small amount per unit, the profit margin on electrical appliances is small, so dynamic demand technology would be highly unlikely to be introduced without a financial incentive or legal requirement to do so.

Due to their significant potential for allowing greater integration of renewable energy on to the electricity grid, and reducing carbon emissions associated with electricity generation, dynamic demand technologies may qualify for incentives funded by the energy efficiency commitment. An incentive mechanism enabled by energy efficiency commitment funds is a very promising method to incentivise dynamic demand technology. However, this would also require further research to be undertaken. For example, it would be important to verify the carbon savings attributed to individual dynamic demand appliances to enable a proportionate financial reward. I recommend to the DTI that this study be commissioned as soon as possible. It is important to send a signal to appliance and component manufacturers that it is worth investing in the development of this innovative technology. I also hope that the Minister can confirm that the new clause in the Climate Change and Sustainable Energy Bill currently in the Commons, which refers to the energy efficiency commitment, will cover dynamic demand.

Clause 2 simply defines the term "dynamic demand appliance" as meaning those electrical appliances that have the ability to adjust their electricity consumption or output according to instantaneous power imbalances on the National Grid. This definition is necessary to distinguish dynamic demand technologies from the many other demand-side energy management techniques that already exist but which do not involve individual appliances monitoring and responding to signs of system stress indicated by mains frequency. The definition is also sufficiently broad to allow for competitive innovation among manufacturers.

The measures in the Bill are simple, practical ways of addressing barriers to the introduction of an innovative and useful technology that could help combat climate change. The figure of 2 million tonnes of carbon dioxide is a worthy target in anybody's book. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Redesdale).

12:46 pm
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Lord Addington (Spokesperson in the Lords (Sport), Culture, Media & Sport; Liberal Democrat)

My Lords, my noble friend has done a very good job of introducing this Bill. It is the sort of measure we should be looking at more closely across the spectrum of ideas. It is a way that we can practically address our power grid and how we reduce CO emissions, without ripping everything up and starting again.

We are always being told that we have to change the way in which we behave, such as switching off appliances. With the best will in the world, if you happen to be a vaguely forgetful person, such as myself, you forget to switch something off as opposed to leaving it on standby. When the Division Bell goes, how many of us leave our computer on standby and do not get back to it? This technology removes that level of human error or thoughtlessness. If it is successful, it will help us cut down energy use. It is exactly the sort of approach we must take to improve energy savings and reduce carbon dioxide emissions. It will require the prodding and pushing that is required by government or somebody in authority to make sure that these things happen by attaching some responsibility—sticks and carrots—to those who produce these items.

The Government will undoubtedly have a scheme or two with a similar approach. But these proposals have been brought forward—now—and the Government can give us an idea about their thinking. If my noble friend has a list of other such schemes up his sleeve, I invite him to tell us about them. This is one area where we should be working together and engaging with one another to make sure we all know what everybody in the field is thinking. I commend the Bill to the House and look forward to hearing what the Minister and my noble friend have to say.

12:48 pm
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Baroness Miller of Hendon (Shadow Minister, Trade & Industry; Conservative)

My Lords, in introducing the Bill so ably, the noble Lord, Lord Redesdale, has explained that it is to assist with the saving of fuel, to make the best possible use of finite resources and last, but by no means least, to assist in the reduction of CO emissions. And who could possibly argue with any of that? The question is, what are the practicalities?

In this country, there are more than 24 million households. It is fair to assume that in this modern day and age, something like 20 million of them have refrigerators, but, for the sake of the debate, let us say just 18 million. They have a life of around 20 years. How long will it take before all the fridges will be changed to the new technology—or enough of them to make a difference—and why would anyone want air conditioning that worked late at night when it is cooler anyway or central heating that did not work when it was coldest and at the time of maximum demand?

I digress for just a moment. Perhaps the most immediate and effective dynamic demand device would be if we could persuade people not to leave their TVs, video recorders and DVDs on permanent standby. I read last week that in an average household that can cost more than £30 a year. How much fuel does that waste and how much pollution does that cause?

All that the manufacturers have to do in the interest of world ecology is to remove the standby facility. It is not too long in the past when a TV was either on or off, with nothing in between. A moment ago I used the word "persuasion". I did so because I believe that it is up to industry to produce fuel- and energy-saving devices and, having done so, to persuade the public of the advantages of buying and using them. I do not believe that there is a place for the provision by our Government—meaning, of course, the British taxpayer—giving, as this Bill calls for, financial incentives to the manufacturers of fridges, TVs and other electronic goods. That is especially true when—and this is the sad situation—so many of them are manufactured abroad including in the Far East. That is even assuming that "financial incentives" is not code for a "subsidy" which may very well be illegal under EU law.

Of course the Government have a part to play in encouraging energy saving and the optimum use of energy in every reasonable way, sort and form. My own party will most certainly be looking into dynamic demand technology as part of its present ongoing energy review. But it is up to industry to develop the technology and to persuade the public that they want and need it. I would commend to industry a paraphrase of the aphorism attributed to Ralph Waldo Emerson. If they build a better and more fuel efficient device, the world will beat a path to their door.

12:52 pm
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Lord Sainsbury of Turville (Parliamentary Under-Secretary, Department of Trade and Industry; Labour)

My Lords, the issues raised in the Bill are extremely important, and for those of us wrestling with the Company Law Reform Bill, which has 980 clauses, a Bill of two clauses has an immense attraction. While we are not supporting the Bill, its concerns are ones which the Government intend to address. I therefore welcome the opportunity given us today by the excellent speech by the noble Lord, Lord Redesdale, to respond to the noble Lord's proposal, and to set out how the Government are looking to understand the contribution that dynamic demand appliances can make to energy efficiency and security of supply.

I hope that, by the end of my comments, the noble Lord will see that there is little difference between us in the overall belief that these technologies can make a contribution to energy efficiency. There may be differences in the implementation, but I hope that I can demonstrate to noble Lords that, in general, the Government are on the same wavelength as the noble Lord.

Dynamic demand technologies are technologies which enable the consumption or generation of electricity to be controlled or adjusted automatically according to network frequencies. They are devices that can adjust the demand of our appliances to help balance the load on the grid. If they sense, through an assessment of the frequency levels, that demand is growing, then they will, for instance, turn the fridge down. In theory that will help energy efficiency as well as security of supply at peak periods. We all know of the surge that takes place at half-time during cup finals. These appliances ought to help manage the demand/supply relationship at those times.

The overall benefit of these technologies is that a smoothed demand pattern leads to reduced need for back-up generation. The figures that I have suggest that that could save up to 0.6 million tonnes of carbon per year, although I suspect that both my figures and those of the noble Lord are speculative.

We are already taking steps to see how we can harness this technology. As the noble Lord said, Clause 15 of the Climate Change and Sustainable Energy Bill currently making progress in the other place will impose a duty on the Secretary of State to publish a report on the contribution that dynamic demand technologies could make to reducing greenhouse gas emissions in Britain. The report will also address whether it is appropriate to take any steps to promote the use of such technologies, and, if it is, what those steps might be. We will produce this report no later than 12 months from commencement. I can assure the noble Lord that appropriate resources will be found to produce a thorough report. Noble Lords might like us to go further than that, but without this initial work it will be difficult to target any support or understand where there might be a market failure. We have done very little proactive work in this area to date, although we have kept up to date with developments. It is clear that these technologies deserve closer investigation to establish how much of a contribution to energy goals they can make. Clearly, any such study would have to address the three questions which the noble Lord raised before we could get an understanding of the benefits and costs.

Also, within our liberalised market we need to understand who stands to benefit from an uptake in these technologies. It would seem that the system operator might benefit, as might suppliers who pay more for their electricity during the peak periods. Generators too have a stake in that the decision to invest to cover the peak periods is often a difficult one—investing to build capacity that may be used for only a few hours a week needs careful consideration. However, if private business is to benefit, it should have a role in developing and encouraging the take-up of these appliances. That, among other issues, is something we need to explore.

The noble Lord's Bill also asks the Secretary of State to establish a standard for dynamic demand appliances. I am not sure why the noble Lord wants to leap immediately to a legislative and regulatory solution. It might be worth while for industry to consider its own voluntary scheme before we burdened it with more legislation from Parliament. I agree with the noble Baroness, Lady Miller, that of equal interest is how manufacturers can work to minimise the amount of energy used in domestic appliances. I am not talking only about when appliances are being used, which is important, but also when they are not. We all know about the waste caused by the standby button. Strange though it may seem, a typical microwave oven consumes more electricity powering its digital clock than it does heating food. While heating food requires a hundred times as much power as running the clock, most microwave ovens stand idle in standby mode more than 99 per cent of the time.

Moreover, if we are deeply concerned about obesity in children, perhaps we should encourage them to stand up and walk to the television to turn it off.

These issues will be covered by Defra in its market transformation programme, which the noble Lord, Lord Redesdale, mentioned, and which is looking with industry and other stakeholders at the environmental performance of products. Could dynamic demand appliances be included in the Climate Change and Sustainable Energy Bill? The short answer is that in theory there is no reason why dynamic demand appliances cannot play a part. I am sure that we will debate that further when that Bill comes to this House.

Dynamic demand technologies are already here and they can support our energy goals. However, we need to be sure that any approach we wish to take will help to accomplish that in the most beneficial and cost-effective way. I congratulate the noble Lord on drawing the House's attention to the opportunities that the technologies open up. I also hope that my comments offer sufficient reassurance to noble Lords that the Government are determined to understand what contribution dynamic demand appliances can make. If our report shows that the work is needed to help deliver the potential, we will do so.

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Lord Redesdale (Spokesperson in the Lords (Energy), Environment, Food & Rural Affairs; Liberal Democrat)

My Lords, I thank the Minister for that reply, the noble Lord, Lord Addington, for his helpful comments, and the noble Baroness, Lady Miller. Perhaps I may deal first with the comments by the noble Baroness. There were a couple of misconceptions here. I believe that the Conservative Party in another place is already supporting dynamic demand—indeed, my reading of the debates on the Climate Change Bill in another place gave every impression of that. The noble Baroness asked how long it would take for the technology to have an impact. According to manufacturers, 3.75 million new fridges are bought in this country every year. I find that a frightening statistic. My own calculations, which are not based on a degree in electronic engineering, show that if 2 million devices were fitted with dynamic demand, that would equal the output of the largest of the nuclear fleet of power generators, which is some considerable amount.

The Minister raised a number of valuable points, including the issue of self-regulation. I would quite happily introduce a Private Member's Bill on standby. I personally find it quite unbelievable that 10 per cent of power generation is being used up in standby and utterly useless features added by manufacturers to meet public demand. However, I very much hope that the Government will support the voluntary code undertaken by the white goods manufacturers to move to 1 watt standby over the next couple of years, which will have a significant impact on energy consumption.

The Minister also referred to the spike during football cup ties when people go off and put their kettles on. I was interested to find out that that is not actually what causes most of the spike; most of it is caused not by people putting the kettle on but by a lot of them going to the loo at the same time and flushing it. The mechanical energy of moving billions of gallons of water around the country far exceeds the amount used to boil kettles. That is the sort of interesting fact that you find out when you have to do a great deal of work on these Bills.

The purpose of this Bill, and of any Private Member's Bill, is to push the Government into thinking about the issues. The likelihood of it succeeding through all the hurdles is a real issue. However, one thing which I believe this Bill has been able to do is to bring together all those who are thinking about this issue and to focus their minds. I believe that dynamic demand will become a reality. I very much welcome the Minister's encouraging words on moving towards doing the background work to find out whether there are any pitfalls with the technology. Obviously, it would be madness to move forward too quickly without finding out whether there are any problems with it. However, I concede that it is an issue because, unlike getting rid of standby, which would mean people getting off their seats to turn something off, this is a device that nobody would know was in their fridges.

I very much take on board the point that the Minister made—that this is about finding a market mechanism, and that those who are benefiting from the system should pay for it. In this case the consumer would not save any money and the appliances would not operate in a different way. The noble Baroness, Lady Miller, said that we would have to turn things on on a different cycle, but in this case no fridge would change its cycle at all. But it would be up to the National Grid to meet the costs. That means finding a way in which it could do so, which cannot be done without a change in primary legislation and a change in the energy efficiency commitment, which has been the hurdle at this point. I believe that that will be changed under the Climate Change Bill, which I very much look forward to debating . I thank the Minister for his most helpful reply.

On Question, Bill read a second time, and committed to a Committee of the Whole House.