New Clause 21 - Cost benefit assessment of energy saving and energy generating

Energy Bill [Lords] – in a Public Bill Committee at 6:00 pm on 21st June 2011.

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‘(1) The Secretary of State must within 12 months of the passing of this Act publish an assessment (“the assessment”) of the costs and benefits of saving energy compared with those of generating energy.

(2) In this section saving energy includes measures to—

(a) reduce demand for energy;

(b) conserve energy; and

(c) use energy more efficiently.

(3) Before publishing the assessment the Secretary of State must consult—

(a) such bodies as in the Secretary of State’s opinion represent—

(i) the energy efficiency industry;

(ii) the energy generating industry; and

(iii) environmental interests; and

(b) such other persons as considered appropriate.

(4) The Secretary of State must take into account the assessment when making any estimates, projections or policies regarding the amount of energy that is required to be generated in order to satisfy the needs of the United Kingdom.’.— (Dr Whitehead.)

Brought up, and read the First time.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I beg to move, That the clause be read a Second time.

I think everybody on the Committee acknowledges that energy saving is probably the cheapest and cleanest way of achieving our energy policy objectives. What is curious about that general agreement is that very little of the reality is examined in the comparison between saving energy and producing greater efficiencies generating it. There is no doubt where the Government stand on this particular issue.

One Minister of State has said that

“there is one overarching simple truth: the cheapest energy we all have to pay for is the energy we do not use”.

He went on to say that

“energy efficiency…is the most important and the best value-for-money consideration in terms of saving carbon.”—[Official Report, 30 June 2010; Vol. 512, c. 870 & 872.]

[Interruption.] Indeed, it was the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle, who, no doubt, has those quotes written out on little bits of paper in his wallet. He is absolutely right. That is increasingly an area that we need to analyse in greater depth not only because it is right in principle, but because of the projections we have in front of us on energy generation and energy capacity.

We have just discussed what we will need in new forms of energy generation over the next few years. The overarching national policy statement refers to the fact that a doubling, or even a tripling, of generation will be required by 2050. To my mind, that figure is very much based on the idea that energy efficiency only has a certain way to go as a component in the drive to decarbonise and produce far lower emission outcomes from our general energy economy.

On the contrary, the European Climate Foundation reported a short time ago that if we combine reduction in demand and measures such as the electrification of heating, around 90% of emissions from buildings can be removed. Indeed, just a little while ago, I saw the passive house concept in Germany, which effectively produces a minus zero-carbon home through various energy efficiency measures. There is an enormous way to go on that side of the equation for carbon emission reductions.

The new clause would essentially close the gap in the analysis of the relative merits of different strategies on low-carbon energy. No long-term assessment of the costs and benefits of energy saving compared with energy efficiency have ever been carried out by the  Government. Although we are dealing with the sorts of figures and potential savings that I have suggested, we do not know—and there is no prospect in the near future—that we will know that information. The new clause would ensure that such an assessment is produced as a tool, which would rank alongside various other measures that have been introduced on carbon budgets things to regulate the overall approach that we subsequently take on energy. It would produce a fairly clear pointer to the hierarchy of measures that should be taken over the next period in energy saving and carbon reduction.

That is what the new clause would require the Secretary of State to do within 12 months of the Bill being enacted. That would be of enormous benefit to the in information in his statements and the overall direction of future energy policy. Of course, he could in theory take such an approach without legislation, and perhaps that would be a good idea. However, it would be an even better idea to have the provision on the statute book, because he could point to a reason why he has to do it when responding to voices suggesting that it should be put off for other purposes. That is the purpose of the new clause. I hope that if it is not accepted by the Government, the intent behind it can be agreed and that measures can be undertaken that give us a much better handle on the distinction between energy saving and energy generation and how that affects our pathways analysis and all the other things that go towards our targets.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

I want to add a few points in support of my hon. Friend’s new clause. The chief scientific adviser at the Department of Energy and Climate Change’s, Dr David MacKay, who is charged with ensuring that the UK meets its 80% CO2 reduction target, was asked what he thought about the cost-benefit assessment of energy saving and energy generating. His response was unambiguous:

“I agree that this is a crucial comparison to make, and I’d love to see us develop a rational quantitative approach that incentivises energy saving in the same way, that, say, renewables are incentivised.”

During the Lords’ consideration of the Bill, Baroness Maddock moved a similar amendment on 19 January, requiring a crucial cost-benefit assessment to be carried out. Replying on behalf of the Government, Baroness Northover said that impact assessments of individual policies were sufficient. We think that that is not entirely accurate, because assessing the impact of individual policies is very different from properly quantifying the full potential of further energy-saving policies and then deciding on the level of energy demand that needs to be satisfied. We therefore have a situation where the full potential of the cheapest and cleanest method of achieving our energy policy objectives has never been fully explored.

Another measure that supports the new clause is early-day motion 644, which was tabled with cross-party support and calls for a cost-benefit assessment of energy demand. It now boasts more than 101 signatories, and on that basis we support the new clause.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I have a huge degree of sympathy with the spirit behind the new clause, although not quite as much as my father. He has been inventing and developing energy-efficient products for the past 20 years. In response to the recent spike in energy prices, he wrote in frustration to The Daily Telegraph to ask why everyone  always ignores energy efficiency. Unfortunately, they did not publish his letter. He then wrote again, asking why they ignored him, but he is yet to have a reply.

It is a fact of life that energy efficiency is almost explicitly overlooked, because people rush to what are seen to be more technological but, invariably, capital-intensive solutions to the challenges we face. It is absolutely true that we need to do far more to drive forward energy efficiency.

As the hon. Member for Brighton, Pavilion said earlier in proceedings, the green deal is not the whole solution. We need to go further. In the electricity market reform proposals, which we will publish soon, and which will be taken forward in a further energy Bill, we will be dealing directly with further ways that we can incentivise whole market and whole economy approaches to energy efficiency and look at how we can come at energy efficiency from the opposite direction to the green deal. The green deal is a way of scaling up from the ground. In the EMR, we will be looking at how we can take large-scale responses and come the other way, as an alternative response to concerns about capacity—alternative to building new generating capacity.

Before we get to that legislation, I can assure hon. Members that we are already engaged with energy efficiency in the Department. The new ministerial team has pushed energy efficiency up the policy agenda. We will publish a report this autumn, which will provide an update on the progress towards meeting the first three carbon budgets and looking at the delivery of the fourth carbon budget. An essential part of that report will be the ambition and progress of our energy efficiency policies. The report will provide the type of whole-economy assessment that the new clause seeks to achieve.

The costs of particular technologies are assessed through extensive consultation with stakeholders. We are upping our level of engagement, and therefore another aim of the new clause is already being delivered and does not need legislative underpinning. We will be formally consulting on the green deal in the autumn, and I reassure the hon. Member for Southampton, Test that we are having extensive discussions outside the formal consultation process with the organisations to which the new clause refers. We have set up two green deal stakeholder forums specifically looking at the costs and benefits of a range of energy-efficiency measures and trying to quantify them with far greater accuracy. They are also exploring the options for promoting the appropriate sequencing of installations.

I appreciate that that probably does not go quite as far as the hon. Gentleman would like, but I assure him—and my father with his Eco-slab—that the Government are actually prioritising energy efficiency as never before. [Interruption.] The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden heckles me from a sedentary position, but I suppose that that was a bit of product placement on behalf of the old man. I pray for the Committee’s forgiveness. I assure the hon. Member for Southampton, Test that we are driving forward on a much more ambitious scale on energy efficiency policy formulation. We are not there yet. We welcome suggestions  and constructive input into the debate, so that when we come forward with our final energy efficiency proposals, particularly in the EMR, we get the best that we can achieve. Accordingly, I would urge the hon. Gentleman to withdraw his new clause.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 6:15 pm, 21st June 2011

On the subject of better names, I think that Eco-slab sounds a little like a heavy metal band and could perhaps be renamed. That is a tip for the Minister’s father, and I hope that it will be taken in the spirit that is intended.

I am encouraged by the Minister’s response, but not quite as encouraged as I was with the previous new clause. Nevertheless, I am sufficiently encouraged, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.