New Clause 4 — Microgeneration

Part of Energy Bill [Lords] – in the House of Commons at 2:15 pm on 13th July 2004.

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Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes 2:15 pm, 13th July 2004

The amendments reflect key debates in Committee on a range of subjects. New clause 6 tries to take forward the issue of energy efficiency in relation to debate on the old clause 3, as it came from the House of Lords. It would establish the concept of a policy goal across the United Kingdom, an aim that differs slightly from that of the Sustainable Energy Act 2003.

The Tory amendments put me a position that I do not much like. I must have forgotten the first rule of politics, which is never to trust a Tory promise. What is worse, that allows my Whips to say, "I told you so." I suppose that lessons are always worth reinforcing. What saddens me about the amendments and the incompetence with which they were moved is that, as was amply demonstrated, the Conservatives see the matter as one for point scoring, not one of taking forward a serious issue. As for Mr. Robertson trying to tempt us to vote with the Tories, any chance of my doing that went out the window with his opening speech. I shall try to touch on some of the real issues involved in energy efficiency, combined heat and power, and the way in which renewables and micro-generation need to develop.

When we originally discussed the energy White Paper, the then Minister, my right hon. Friend Mr. Wilson, cited 20 per cent. as the contribution that could be made by energy efficiency. That translated into 5 megatons of carbon savings, but we are now talking about 4.2 megatons, or about 16 per cent., of savings. The White Paper said that residential energy efficiency was the cheapest, cleanest and safest way to achieve CO 2 emission reductions. It seems absurd to reduce our key target for achieving our carbon-saving objective. Surely we should be setting challenging targets, not reducing them. That has an impact on the energy efficiency savings industry, which sees it as one of the key things that it can take to the market in developing its investment strategies, as was made clear in a letter to the Prime Minister on 11 May, in which the industry stated:

"we cannot stress highly enough the seriousness of the blow dealt to the energy efficiency industry by this . . . reversal of Government policy"— the reduction from 5 megatons to 4.2 megatons. The letter continues:

"This has caused a major crisis of confidence."

How do we ensure that the industry makes investment, that we do not repeat the mistakes of the past and that the industry can move forward? I question the figures on which the Minister has based his judgment about the 4.2 megatons.

The Energy Savings Trust, which had worked on the figures for some months, gave evidence to the Environmental Audit Committee on 25 May, stating:

"We were involved in developing the Plan . . . we . . . did not have the final decision and we do not agree with it."

It gives several reasons for that, and I am sure that the Minister has examined the evidence. The trust claims that some matters were not taken into account, such as a recurring annual saving. Several other measures were not factored into the plan.

I stress that I appreciate that the Minister has to take the flak, I understand that the Department wants to do as much as possible for energy efficiency, and I thank him for his work since Committee. However, many people support a challenging aspiration. They say that the key way in which to achieve our carbon savings is through energy efficiency. I hope that our debate will allow the Minister to take the matter forward and work with the industry to ensure that savings from the residential energy efficiency sector can be more than the proposed 5 megatons.

Government amendment No. 1 would remove clause 81. In an intervention, I asked the Minister how he intended to implement something that was not on the face of the Bill. There is a problem, which applies to several independent regulators. How can we square Government policy with the role of an independent regulator? Bryan Carsberg, the first telecoms regulator, said that the regulator would always go back to the statute book. That constitutes the regulators' terms of reference. If a provision is not on the statute book, a barrier is created.

What happened to combined heat and power after the introduction of the new electricity trading arrangements is an important indicator of the impact that a regulator can have. Those events could be repeated. I understand that the Minister wants to ensure that they are not, but the regulatory framework that could allow that to happen still exists.

The problems in the renewables industry do not arise because the companies are not viable or because they do not do good work, but because of the regulatory hurdles that it has to overcome. The Sustainable Energy Act 2003, which introduced regulatory impact assessments into Ofgem's work, has improved matters. At a meeting of the Liaison Committee, the Prime Minister said:

"We believe we will meet the target for renewables, but it is challenging and I think that there is a need, as we are doing, to step up investment in renewables . . . and it is one of the issues that we will be raising in the context of our G8 chairmanship next year . . . This requires an awful lot of investment in research and development."

He is right that a step change is required, and for that to happen, we must remove some existing barriers. One such is Ofgem's terms of reference. I appreciate that the Minister has to ensure, in removing clause 81, that the barriers are not replicated.

We need to ensure that there is a public awareness campaign for energy efficiency. We need to build capacity in the industry and to stimulate uptake. Those are important issues but they all come back to the way in which Ofgem interacts with Government policy. We have given Ofwat a sustainable development duty, but it does not apply to Ofgem. The question of whether environmental issues are at the heart of government needs to be answered in the context of regulators' duties. If we are adequately to tackle sustainability, consistency should apply to water, electricity and all the other regulators. As the Government remove clause 81, I urge them to consider the way in which we remove regulatory barriers.

We have a history of targets for combined heat and power. Representatives of the industry have been to see the Minister, and there is a crisis of confidence about investment, including in micro combined heat and power. In Committee, the Minister made several comments, with which I shall deal shortly. First, though, I thank him for being prepared to meet industry representatives and for the meetings that he has held since Committee. They have been helpful, and I place my thanks on the record.

In Committee, the Minister said that removing the renewables obligation on CHP would mean an impact of less than 0.3 MW. The Combined Heat and Power Association said that more than 2,000 MW of CHP plant is currently on hold and that much of it could be realised if such a provision was in place. If we are not to introduce such an exemption, it is incumbent on us to find other mechanisms to ensure that the CHP industry can move forward.

Many hon. Members wish to speak, and we have already heard a point of order on that. I shall therefore be brief. We need to ensure that the energy efficiency, CHP and renewables industries have open-door access to the Minister. The key players in each industry are the same. Their investment decisions will determine whether we are successful. It is immaterial whether the amendments are successful. What matters is the Government's interaction with the industry. I urge the Minister to accept that dialogue with the industry on microgeneration, the renewables obligation and energy efficiency is critical and needs to be taken forward.