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Mr. Blizzard: I congratulate my hon. Friend on establishing Renewables UK. It is extremely important. What role does he envisage for regional development agencies in the process, especially in developing the supply chain? That will be the real challenge. We have companies with the skills and expertise that want to build wind turbines, for example, and it is important to get the necessary supply chain for components.
Mr. Wilson: My hon. Friend makes an important point about an activity that is truly nationwide because every part of the country can participate in it. Some of the richest renewables resources are in parts of the country that have not traditionally been associated with the generation of electricity. It is logical to locate the manufacturing activities near them. I am sure that the RDAs are alive to the possibilities. I have visited some outstanding examples. I attended an excellent conference in Manchester at which 500 companies were represented. There is a terrific initiative in the north-east of England based in Blyth. The Scottish development agencies are also very much involved.
I know of my hon. Friend's constituency interest in oil and gas. Renewables UK is located in Aberdeen to maximise the synergies between the oil and gas industries and renewables technologies. In places such as Lowestoft and Great Yarmouth, where oil and gas activity is well developed, it must be possible to transfer that into manufacturing activity for renewables.
The most energy efficient programme of all is one to which we can all contribute: it is simply to use less. The hour has come for energy efficiency to be taken far more seriously in this country. A wide range of energy efficiency programmes are in place, and they go with the grain of all our energy policy objectives. They can help us simultaneously to tackle climate change and fuel poverty, and to enhance security and promote competitiveness.
Energy efficiency offers a major chance to save carbon cost-effectively. The major instruments used to improve energy efficiency are the climate change levy, which encourages business to become more energy efficient, and the energy efficiency commitment. Advice on the promotion of energy efficiency is provided by the Energy Saving Trust and the Carbon Trust working together to lower the carbon intensity of both the domestic and the non-domestic sectors.
The energy efficiency commitment launched on 1 April gives energy suppliers an obligation to offer help and advice to domestic customers to help them to reduce their energy consumption. The commitment runs until 2005, by when we expect it to have generated outgoing annual energy savings for consumers worth more than £275 million, as well as annual reductions in carbon emissions of about 0.4 million tonnes.
The UK fuel poverty strategy that we recently put in place sets out a range of programmes and measures to address the main causes of fuel poverty. In England, our key mechanism for tackling fuel poverty in the private sector is the home energy efficiency scheme, now marketed as the warm front team. The scheme provides grants of up to £2,500 for a range of insulation and heating measures, and has already assisted 350,000 households.
Linda Gilroy (Plymouth, Sutton): The energy review calls for a step change in household energy efficiency of 20 per cent. by 2010 and a further 20 per cent. by 2020. Will it be possible to bring that together with our attempts to tackle fuel poverty, so that we can square the circle? In particular, will my hon. Friend undertake to listen carefully to representations made by organisations such as National Energy Action about the questions raised in the Government's document on the social implications of fuel poverty and how they can best be addressed?
Mr. Wilson: I know of my hon. Friend's interests in such matters, and I agree strongly that the two issues should be brought together. The great benefit of energy efficiency measures is not only that energy costs less, but that we use less of it. There are winners all round. Both those desirable outcomes can be achieved for a very small investment on a household basis. We just have to be more proactive in taking that message to the door of people who can benefit from it, and work with the utilities to put in place programmes that will extend the success of some of the initiatives that have already been taken. We have strong advisory teams on energy efficiency and fuel poverty. I could not agree more that the two should be fused together to maximise the outcomes.
Dr. Desmond Turner (Brighton, Kemptown): The Minister will be aware of my Home Energy Conservation Bill, which deals with energy efficiency. Although the Government support it, there seems to be a minor problem with it. Will my hon. Friend comment on the contribution that the Bill could make, on its great desirability and on how it could help with the issues that he is raising?
Mr. Wilson: We are as one on the principles, and I am happy to continue to discuss the detailed implementation. The Bill has played a great role in raising the profile of home energy efficiency and demonstrating the extent of parliamentary support for more action on that issue. I commend my hon. Friend on introducing it.
I shall say a few words on combined heat and power, because I do not want to be accused of avoiding the subject. On 15 May the Department for Environment, Food and Rural Affairs published the draft strategy for combined heat and power, for consultation purposes. It describes the full range of measures, some recently announced, that may be sufficient to meet the target of 10,000 MW of good quality CHP by 2010. We fully recognise the problems that the sector faces, not least because of the impact of high gas and low electricity prices. Full exemption from the climate change levy for exports of CHP-generated electricity, announced by the Chancellor in the Budget, as well as other measures in
the strategy, should do much to help. I am seized of the problem and will keep the CHP industry under careful review.
Mr. Gareth Thomas: I welcome the Chancellor's decision on the climate change levy and the publication of the strategy. However, will my hon. Friend comment on the desirability of a CHP obligation to mirror the renewables obligation? Could that be the final bit of the jigsaw to turn round the fortunes of the CHP industry?
Mr. Wilson: It is an option. A range of technologies would benefit from an obligation. One of the problems is that the more we stack up the obligations, the more impact we have on the price that the consumer pays. There is a fine balance to achieve. Everyone in an informed debate would say that the renewables obligation is a virtuous and good measure, but when it was announced the only media coverage that it received concentrated on what it would cost the consumer. A figure was put on it. I think that consumers accept the renewables obligation in so far as they are aware of it—but at what point we run into difficulties and it becomes counter-productive to keep stacking up obligations is another question, and we have to keep that in mind.
There are several technologies that I should like to help in similar ways, but whether an obligation or a series of obligations is the way to do so is a matter for legitimate discussion. That could form part of the consultation, but I caution hon. Members to take account of what I have just said.
Richard Younger-Ross (Teignbridge): Will the Minister give way?
Mr. Wilson: Yes, although I want to make progress because I am aware that I have already been on my feet for 40 minutes.
Richard Younger-Ross: The Minister is very kind. Will he comment on the fact that the executive summary in the strategy document lists nine points under which CHP can be helped, but none mentions the need to reform the new electricity trading arrangements?
Mr. Wilson: I am glad that I gave way to the hon. Gentleman, because he has just acted as my straight man. I want to turn now to the electricity market, and in particular to NETA, which has been going for just over a year. The PIU report argues that institutional barriers to investment in renewables and CHP should be addressed urgently. Those include the impact of NETA, the organisation and finance of local distribution networks and the working of the planning system. Action is already under way to address those issues.
NETA has been successful in reducing the generated cost of electricity, but I recognise that it has raised a range of concerns, including those that impact on small generators. Last November we published a consultation document containing proposals specifically aimed at addressing the concerns of small generators. In response to that, changes are being made gradually in the industry through its dialogue with Ofgem. I am pleased that
progress has been made with Ofgem and the industry in tackling some of the technical barriers. The Government recently published a response to the consultation document which sets out further action that we have identified to address the remaining issues.In addition, a frank review is now taking place of NETA's first year of operation and where it should go from here. Everybody who studies the subject knows that at one level NETA has worked very efficiently, but equally, everybody knows that there have been negative effects that either stem from NETA or are attributed to it, perhaps wrongly. We have to get to the bottom of those and make sure that NETA's benefits are not obscured by its negative impacts. We are also preparing legislation that will extend the trading arrangements throughout Great Britain. Before we do that, we have to make sure that they are working as they were intended to, and in accordance with the Government's wider policy obligations.
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