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General Committee Debates
Delegated Legislation Committee Debates
|©Parliamentary copyright||Prepared 27th July 2010|
Publications on the internet
General Committee Debates
Delegated Legislation Committee Debates
Draft Electricity and Gas (Carbon Emissions Reduction) (Amendment)
The Committee consisted of the following Members:
Chris Stanton, Committee Clerk
† attended the Committee
The carbon emissions reduction target—CERT—requires larger energy supply companies to meet household carbon emission reduction targets. This amending order is a further sign of the coalition’s commitment to a new and far more ambitious approach to tackling energy efficiency. The order will extend the supplier obligation framework to December 2012 and significantly refocus it over that period. It will act to drive investment and to secure jobs in energy efficiency industries. It will ensure that households—and the UK more broadly—save energy and money, and reduce carbon emissions. Before turning to the details of the order, let me give a reminder of the critical role that energy efficiency has to play as part of the transformation to a low-carbon economy.
UK households spend £20 billion on energy every year, mostly on electricity and gas, and account for close to 30% of all the energy consumed in the UK. The energy that is used to heat our homes brings about a direct contribution to climate change, and that makes the household sector an extremely important route for meeting our national emissions reduction targets and carbon budgets. However, energy saving measures are not just about carbon; they are a win-win. They help to increase our energy security by reducing our reliance on imported fossil fuels. They are also the cheapest way of closing the gap between energy demand and supply, thus enhancing our economy’s competitiveness. Energy efficiency provides environmental benefits and delivers carbon emission reductions and local air quality improvements as a result of reduced fossil fuel use. Energy saving measures support fairness by providing hard-pressed families with a simple means of saving money and protecting them against cold, inefficient homes, as well as insulating them from future rises in energy costs. They provide further economic benefits by creating employment opportunities in manufacturing and service delivery in respect of a range of energy efficiency technologies.
I shall give a little more context for the CERT extension because it is by no means the only string to the coalition’s bow in our approach to energy efficiency. There are still substantial opportunities to improve the efficiency of
It is imperative that we maintain and quicken, when possible, the pace of energy efficiency investment and activity. We must act immediately. We cannot just wait for the new green deal to arrive. We cannot wait to act on energy efficiency while we develop and implement the longer-term green deal strategy. The refocused and extended CERT will therefore set suppliers a new and challenging target. The scheme will focus on driving insulation measures and helping to secure an improved share of investment for low-income households. It will act as important bridge to the future, building momentum as we put arrangements in place for the green deal.
The order builds on the work done by the previous Government—I acknowledge the significant part played by the right hon. Member for Lewisham, Deptford—to put forward specific proposals for consultation. I know that there is a good deal of consensus on the importance of the order, which I welcome, and whenever possible, I want to build on that. However, although the previous Government’s proposals were good, they did not go far enough, and that is why we are acting to reshape the scheme. We wish to drive a step change in professionally installed insulation delivery by boosting the supply chain for core measures such as cavity wall and loft insulation and allowing innovative measures such as solid wall insulation, which will help to sustain greater activity in the future.
Before I turn to the amendments that will be made under the order, I thank all those across the spectrum of interested parties who responded to the previous Government’s consultation. They included energy suppliers, the insulation industry and local authorities, as well as environmental and fuel poverty groups, and their contributions were crucial in informing our decisions.
We will extend CERT to the end of 2012, increasing the target by 108 million lifetime tonnes of CO2 and setting a new overall target of 293 million lifetime tonnes. That increase equates to just over a 3% cut in household greenhouse gas emissions in 2013, or one fifth of the CO2 emissions from the UK’s largest power station. Given how far advanced suppliers are in meeting their existing targets, they will be allowed to start work against that new target immediately to ensure that consumer access to energy efficiency measures is not interrupted. However, we want to stamp out the mistakes of the past by introducing a complete ban on the subsidy on fluorescent lamps, thus ending the farcical situation of light bulbs filling up cupboards but saving no energy.
Joan Ruddock (Lewisham, Deptford) (Lab): I am sure, however, that the Minister will not disagree that every low-energy light bulb saves carbon and money. Although there might be many such anecdotes, the overall programme succeeded in reducing emissions and saving people money whenever the bulbs were installed.
Gregory Barker: The right hon. Lady is absolutely right. We are fully in favour of low-energy light bulbs, but the key point is their installation. The problem is that when they are sent unsolicited, they often lie uninstalled in people’s cupboards, or are never picked up from the post office. If an energy supplier sent out light bulbs, that counted towards its CERT commitments, even if the bulbs were never plugged in so that people could save money. I fully accept that the right hon. Lady and the previous Government took steps to phase out the unsolicited mailing of light bulbs, but we have gone further. The previous arrangements left intact the subsidised sale of light bulbs—the 10p light bulb at the supermarket that people would pop into their trolleys but never deploy—but that subsidy has gone as a means of fulfilling the CERT obligation.
Gregory Barker: Unfortunately, that argument is not necessarily supported by the huge tubs of unsold light bulbs that I have seen on many occasions, but I am drawing on anecdotal evidence rather than hard empirical statistics.
The order will require more than two thirds of the increase in the overall target to be delivered through something that we can all agree is an imperative: professionally installed loft, cavity and solid wall insulation. That will provide the insulation industry with the confidence to invest and ensure that all consumers who want to make a real difference to their energy bills and carbon footprint have cost-effective opportunities to do so.
With DIY loft insulation and other insulation measures, such as flat roof insulation and improved glazing, more than 80% of the scheme is now expected to come from real insulation measures, which represents a step change from the current scheme, under which only 62% comes from such measures. That means helping 3.5 million households through insulation measures, including by providing enough loft insulation to cover the inside floor of the O2 more than 1,000 times—that is a pretty extraordinary statistic.
“We’re pleased that energy suppliers will no longer be able to treat CERT as a box-ticking exercise by sending out millions of
“We welcome this bold move by Government and recognition of the critical role that insulation has to play in reducing energy bills and tackling climate change…This will provide significant benefits to householders and a much needed boost to our industry enabling us to plan and be ready for the introduction of the Green Deal in 2012.”
I need to say something important about vulnerable groups. To ensure a more equitable and fair distribution of measures in the light of the Government’s commitment to tackling fuel poverty, we are creating a new obligation towards those households with the greatest need. Those broadly defined as low-income pensioners, families with children, and the sick and disabled will form a super-priority group at which at least 15% of the new programme must be targeted. Furthermore, each benefiting household will be required to receive a heating or insulation measure, which means that an estimated 600,000 heating measures will be professionally installed in the most vulnerable homes in Great Britain, with more than £400 million focused on helping the very poorest. Additionally, we will provide vulnerable households with continued support for microgeneration measures under CERT. When combined with the incentives available under other mechanisms, that will provide poorer households with access to renewable technologies that can help them to heat and power their homes.
The obligation will be met most cost-effectively by suppliers and local communities working together to source opportunities and to reach out to vulnerable households. One building block will be the energy rebate scheme, which is now aimed at a subset of pension credit claimants. We expect up to 250,000 pensioners on low incomes to receive a rebate worth a total of up to £20 million under the scheme and that significant numbers of such households will go on to be targeted with supplier offers under CERT.
Overall, the CERT extension will have a significant and positive impact on fuel poverty, with approximately 175,000 households expected to be provided with measures that provide a long-term solution to fuel poverty. Many more households will receive measures that can protect them from falling into fuel poverty in the first place.
The current rates of solid wall insulation are low and are thought to be negligible off the gas grid. We will therefore provide a boost in carbon score by linking solid wall insulation to the fuel use in a property. That amendment to the way in which solid wall insulation is scored will provide additional incentives for promoting solid wall insulation in off-gas-grid properties. We hope that that will lead to a far more balanced geographical equity and to stimulation in the market for technology that needs to be rolled out at scale to meet carbon budgets. I hope it will also address the unfairness that some have perceived under previous schemes that have seemed to discriminate against off-grid households, particularly in rural areas.
We are increasing the scrutiny provided to installations under the scheme. The regulator Ofgem will have more directive powers to require address-level reporting. That will allow better scrutiny of any possible fraudulent claims and ensure that there is no double counting
In summary, the radical reshaping of the scheme that the order represents will help to bring about a step change in insulation roll out and maximise the scheme’s contribution to achieving environmental and social ambitions. It will help millions of households to benefit from measures that offer significant energy bill savings, as well as offering a potential long-term solution to fuel poverty for many households while protecting others.
Industry and consumer groups have made clear to me the urgency that they attach to bringing the measure into force before the summer recess. There is considerable risk that without action to bring the new targets into force now, the availability of insulation offers to homes will cease in the coming months. That is why I am particularly pleased that we can have the debate today and, I trust, agree to the measures. By doing so, we can protect householders’ interests by ensuring that they benefit from measures that can save them money, improve the warmth of their homes and cut carbon emissions. That is particularly important for those who are vulnerable to the detrimental health impacts of a poorly heated and insulated home—those households that will be most targeted by the policy.
I sense a strong degree of consensus about the measure. I therefore call on all hon. Members to support it so that we can immediately bring a new impetus to the household energy efficiency agenda so as best to serve the interests of the economy and our constituents.
Joan Ruddock: I welcome you to the Chair, Miss McIntosh, and I also welcome the Minister to what I believe is his first statutory instrument Committee in his new role. I am delighted to be here to represent the Opposition.
I thank the Minister for his explanation of the order. As he acknowledged I am somewhat familiar with its content. As his immediate predecessor, I was responsible for its drafting and for the consultation on it. I was delighted to see the results and to learn that the Government are to proceed with it.
When I took on responsibility for CERT, I began to look for ways to improve it, as I always did in my departmental tasks. I wanted to increase the number of jobs that were done, to direct them to those who were least likely to be able to pay, and to get rid of compact fluorescent lamps or CFLs. That is why, when we amended last year’s CERT order, we increased the obligation on energy suppliers by 20%, responding both to the huge increase in gas and energy prices generally at the time, and to the pressing need to tackle climate change.
We also banned, as the Minister has acknowledged, the direct mailing of CFLs, which led to many anecdotes such as those that he recounted. However, I urge him to recall—he spokes of millions of light bulbs, as if the whole CERT scheme was directed at sending them out—that in fact 2.5 million insulation jobs were undertaken under CERT in the past couple of years; and, I think, something in the order of 46 million or 47 million square metres of insulating material was provided through subsidised DIY schemes.
As the Minister has said, the order gives effect to a further increase in numbers by extending the scheme by 21 months, and implementing greater targeting on those least able to pay. That was the intention of the previous Government, and I am happy to support the measure. The extension to the end of 2012 was proposed by the previous Government to allow time for the feed-in tariffs to settle, and for the renewable heat incentive and the pay-as-you-save eco upgrades to come on stream. The CERT extension was part of a comprehensive strategy that the Minister has repeatedly rubbished. Will he tell us how the CERT extension fits in to his strategy? How many of the remaining cavity walls and lofts does he expect to be filled and by when? He indicated that the Government’s programme is much more ambitious, but will he tell us what the difference is between our targets and his targets? How many solid wall treatments does he expect to see delivered under CERT? He appeared not to acknowledge that there had been any, but there were tens of thousands of such treatments under the previous programme. My major concern is how to increase the incentives for energy companies to tackle the more hard-to-treat homes.
Existing CERT legislation provides for 40% of savings to be delivered to a priority group. In practice, we expected about 60% of investment by the energy companies to be delivered to the existing priority group. Will the Minister tell the Committee what his estimates are, and will he confirm that the 15% super-priority group is a sub-group of that 40%? What consideration has been given to the plea by National Energy Action for the super-priority group to be additional to the existing 40% priority group? Will the Minister give the Committee more information about the measures that will be delivered to the super-priority group? He mentioned flat roofs and double glazing in that context. However, if he looks at annex F of the impact assessment, he will see in the columns that relate to flat roofs and double glazing that the indicative mix of measures suggests that zero impact would be delivered on both those measures to the super-priority group.
Is the Minister satisfied that those whom he has defined as the poorest people with hard-to-treat homes that require many treatments will get the uplift that his words seem to imply? The super-priority group is described as
How will those super-priority households be identified by the energy companies? That is an important question, because the Minister has previously criticised spending on the advertising of schemes in order to identify the vulnerable households that we have targeted, and he has expressed concerns about data protection.
As the Minister will know, we legislated for the sharing of data on pensioners—the poorest pensioners in particular—with the energy companies. We also instituted pilots on that data sharing. What account has the Minister taken of those pilots, and how is he making use of them in delivering the programme?
I always aimed to get the maximum contribution from CERT to assist those living in fuel poverty. However, I was never under any illusion that CERT alone could take all households receiving insulation measures out of fuel poverty, especially at a time of high prices. That is why I raised the amount of the grants available through Warm Front and introduced measures to increase the
As a result of the three-year spending cycle, Warm Front’s current funding will end in March next year. I see that the Minister made a written statement today setting out his intentions with regard to Warm Front; it seems to signal an end to the programme. Will he explain exactly what the statement means, as it is highly relevant to the extension of CERT. Does he accept that that extension cannot be a substitute for Warm Front? Is he not providing in his statement for the end of Warm Front’s grant-giving programme? Nowhere does the coalition statement indicate that a new grant-giving programme will be introduced.
What is the Minister’s response to the campaign by the End Fuel Poverty coalition to continue Warm Front funding until 2012, when a successor grant-based scheme might be developed? Does he accept that although both CERT and his proposed green deal would provide many fuel-poor households with appropriate comfort levels of warmth, they cannot provide the financial savings necessary to repay the cost of the green deal? Does he intend to make the case to the spending review for continuing Warm Front, at least until 2012? If not, what advice has he received on the extent of continuing fuel poverty—an issue about which he has been absolutely scathing in the past?
I know that the Minister enjoyed asking many questions of me when I was in his place, and I trust that he will take the same pleasure in answering my questions. If he does so, I shall be more than happy to support the order.
I shall address a couple of issues that have come to my attention. I particularly welcome the Government’s extension and expansion of CERT, and their recognition of the importance of saving energy to reduce carbon emissions and build on our security. Over many generations, we have all talked about the importance of conservation, but it is great to see more action being taken to deliver it.
I should declare that I am honorary vice-chair of Energy Action Scotland, a fuel poverty charity. It has been suggested to me that a refinement of the scheme might be possible, although perhaps not under the order. When dealing with blocks of flats, it would make sense for energy companies to consider the worst flat in the block as the score for the whole block. They could then tackle the block and, therefore, the worst flat. If each flat is scored individually, some flats will fall out of the scheme. Because of technical issues, it is not always possible to insulate a bit of a block of flats, so the whole block misses out. Perhaps that could be addressed.
The other point from Scotland is that we have longer, colder periods, yet the scheme is averaged across the United Kingdom. An energy company investing in the highlands or north-east of Scotland would make more of a contribution to the environment than if it invested in the south, so perhaps that could be reflected in the measure.
I support the measure on light bulbs, and I particularly welcome the solid wall measure. In north-east Scotland, many houses are not on the gas grid, and many of them have solid walls. Increasing the score may therefore mean that the energy companies will do something to tackle that problem. I can see a divergence coming, given the current level of gas prices, compared with that of oil prices. Many people who are not on the gas grid will lose out even more than they do at the moment as that price disparity worsens. Anything that can be done to improve the energy efficiency of houses that are not on the gas grid will help those houses and communities. There is more to be done. So far, we have been tackling easy measures, such as cavity wall insulation. If we can do more on solid walls, that will be greatly welcomed.
Gregory Barker: I am very grateful to the right hon. Member for Lewisham, Deptford for her remarks about my debut which, on balance, were very kind, given the great experience that she could have deployed towards a new Minister.
I shall address the questions that the right hon. Lady asked, specifically about the number of cavity walls that remain to be filled. We reckon that the number is about 3 million, but there are also 7 million lofts. We anticipate that we will fill all of those over the lifetime of the programme.
Joan Ruddock: I would like to be absolutely clear about what the Minister means by “the lifetime of the programme”. Is he saying that all cavities and all lofts will be filled by 2012? I would be surprised if that were the case, but also delighted.
The right hon. Lady also asked about the super-priority group, and whether it was a subset. That super-priority group is 15% of the 40%. It is a subgroup of the priority group. To put it in monetary terms, of the £2.4 billion of supplier investment, about £1.3 billion will be allocated to the priority group. That means that about £400 million will be specifically allocated to the super-priority group. CERT needs to balance environmental benefits and social benefits, but I think that we have pushed to the limit the social benefits that we are trying to wring out of this instrument.
I think that it is worth saying that the extension of CERT is not ideal. We want to do more, particularly for the fuel-poor, and we think that a supplier obligation is a significant tool for achieving that. We anticipate that, as part of a focused series of measures that will work as part of the green deal, a key lever will be an ongoing supplier obligation. We will work closely with stakeholders during the coming months to ensure that when the CERT extension finishes at the end of 2012, there is a new bespoke supplier obligation, designed to work with the green deal, which will focus far more on those who are in the worst fuel poverty.
Within the constraints of this type of obligation as laid out in legislation—constraints with which the right hon. Lady will be familiar—we think that we have probably pushed the envelope as far as we can without
The right hon. Lady rightly asked about the nature of data sharing, which is a consistent concern for a range of reasons at different ends of the spectrum. She will recall that, under her Government, the Pensions Act 2008 allowed for information on pension credit recipients to be shared with energy companies. The current energy rebate scheme uses that information to provide £80 rebates on the electricity bills of all pension credit recipients. We intend to use that and build on that framework. Energy companies can use information on pension credit recipients to target measures at CERT’s super-priority group. She will know that the elderly are a particular focus. There is a problem in reaching those people, who are an important part of the group considered to be fuel poor.
The right hon. Lady also raised important questions about Warm Front, and she was right to do so. The order relates to that so, with the latitude of the Chair, I shall discuss that point. Warm Front impacts on CERT and it is important that the scheme works in conjunction with the order. Today, we are simply putting a precautionary measure in place, so that if the budget for Warm Front is exhausted before next April, we can end the funding there and the scheme is not over-subscribed. Once the existing budget has been completely met—we are committed to fulfilling that, and it is unchanged from previous projections—if the scheme becomes over-subscribed, we will not take unfunded commitments during that period. That is all we are saying.
Warm Front remains open but, in the current environment, it is prudent to take such action. A lot of people will be surprised to learn that that was not the case before. Previously, there was hand-to-mouth borrowing from the next year’s budget on the assumption that the budget would be there. We are introducing more orderly housekeeping. I cannot comment on next year’s Warm Front as, like every other Government programme, it will be subject to the comprehensive spending review this autumn. The overall direction will be to make sure that the green deal is our primary lever for attacking fuel poverty and addressing energy efficiency on a far greater scale.
Joan Ruddock: The Minister keeps repeating that, but it just does not work. The measures provided under Warm Front have meant that households living in fuel poverty have an opportunity to be warm for perhaps the same price. Now, however, savings will not be used to offset fuel bills—that is the absolute basis of his green deal. I am asking him very specifically whether he thinks that CERT can cover for Warm Front or whether he thinks the green deal can cover for Warm Front. I believe that neither can, and that there is a need for a grant-giving programme to tackle fuel poverty.
Gregory Barker: I will be very honest with the right hon. Lady. Our thinking on this is still evolving and we will listen to her arguments and those of stakeholders across the board. As it stands, CERT is not an option. As I said in my opening remarks, we are considering
The pay-as-you-save model will serve the majority, if not the lion’s share, of people. Nevertheless, a significant element, particularly among the fuel poor and people with hard-to-treat homes, will need additional support, which we will primarily tackle through an enhanced supplier obligation. We are talking about more than £1 billion a year in the supplier obligation—considerably more than the Warm Front budget this year, which is a little in excess of £300 million. The sums and scale of money are very large. We are designing a new architecture, which will be far more sustainable than the hand-to-mouth, annual Treasury-capped grants. However, the right hon. Lady should not get me wrong—I am not writing off Warm Front.
Joan Ruddock: I am grateful to the Minister, but he is not dealing with the point. However he does it, in March or April 2011 he will not have a programme in place equivalent to one providing the heating systems and insulation required by people in fuel poverty. He must remember how a stern a critic he has been of all the fuel poverty policies of the previous Government, setting aside the 2 million homes provided for under Warm Front. There is no need for the draft order for which he produced a written statement today—to me, it seems a way of ending Warm Front without anything to put in its place.
Gregory Barker: Indeed. We are reshaping the architecture for delivering energy efficiency and ending fuel poverty, on a far greater scale than anything attempted by the previous Government. The right hon. Lady knows that we were not on course to deliver the fuel poverty objectives of the 2016 target to which the previous Government were committed. We are looking at things much more ambitiously.
Our minds are focused on what the architecture should look like, but I fully accept that there will be an intervening point between 2011 and 2012. I cannot make any binding statement at present because, as I said, we are subject to the comprehensive spending review, so I cannot make an announcement until after it has taken place.
I repeat to the right hon. Lady that the long-term future of energy efficiency will look different from the stop-go, annually capped measures deployed by the previous Government. I expect to be able to make an announcement in the autumn about further interim measures. Today, however, we are putting in place sensible housekeeping measures designed for when the current budget has been spent—it goes through to the end of March 2011 but should be fully spent ahead of that time. We want to ensure that we do not overextend ourselves and spend money that we do not have. I have not come here to write off Warm Front.
Joan Ruddock: I simply ask the Minister: when he prepared his written statement, what advice did he have about the levels of fuel poverty that would exist if no grant-making programme were put in place next April?
Gregory Barker: That was not something that was pertinent in preparing the statement. I am looking at fuel poverty generally, and at a whole range of options for the long-term architecture. However, my statement today is only about meeting the budget through to March 2011. It is not a long-term commitment or statement about the future of Warm Front; it is about reassuring people that the budget announced previously for Warm Front remains fully in place. We are fully committed to a large range of measures throughout the coming months to March—through the winter—and we are ensuring that they are fully funded.
The measure is simply a housekeeping one, to ensure that the programme, should it become fully subscribed, will not start spending money that it does not have. I realise that that is a bit of shock to the previous Administration—a slightly alien notion—but I am afraid that good housekeeping starts with our new Administration.
I hope that I have addressed many of the issues raised by the right hon. Lady. The hon. Member for West Aberdeenshire and Kincardine made some pertinent points about blocks of flats in particular. I do not have an immediate answer, but I am happy to go away and dwell on the points that he made—flats are, of course, included in CERT, but he made some additional points, which I will discuss. I will write to him with a more considered view after the Committee has risen.
As I said, it is essential, before the introduction of the green deal—a new and ambitious approach to driving home energy efficiency—that we do everything that we can to maintain and, where possible, quicken the pace of energy-efficiency improvements. Through the amending order that we have been debating, we will trigger a step change in insulation offers. Insulation will increase as a result of the CERT amendments, many of which build on the work of the right hon. Lady when she was in government.
We will help millions of households to adopt measures that will offer them substantial savings on their energy bills—a benefit not to be underestimated in difficult financial times. By increasing the focus on lower-income, pensioner and family households, we can make a real difference to household energy bills this winter, offering a long-term solution to many more vulnerable households. I therefore hope that the Committee will support the refocused CERT scheme, so that householders and the UK more broadly will be able to reap the benefits of energy-reducing measures in the nearest possible time frame.
|©Parliamentary copyright||Prepared 27th July 2010|