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“to supply customers on private wire combined heat and power (CHP) networks as well as implementing energy and environmental services in both the public and private sectors”,
“partnership with the private sector”.
The council claims to be the first UK authority to have adopted a comprehensive climate change strategy. I am sure that many others would argue the toss about that. Ultimately, the proof is in the pudding.
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The Nottingham declaration involved a number of local authorities that came together in partnership to decide how best to support one another in taking action to adapt to the impact of climate change and reduce carbon emissions. Some 200 local authorities signed the Nottingham declaration, but signing a declaration is not the same as doing something, which is why new clause 7 is important. It would achieve something.
In London, through the London Development Agency, we have seen progress through the setting up of the London Climate Change Agency, which is a municipal company owned by the LDA. Until the last election, it was chaired by the Mayor. Whether the new Mayor will decide to chair the agency along with the Metropolitan Police Authority, alongside all the other things he intends to do, remains to be seen. Obviously, that will be a test of his commitment to these issues—but I digress.
The LCCA has set up a joint venture energy services company or ESCO to develop decentralised energy schemes for London. It designs, finances, builds, owns and operates local decentralised energy systems for new and existing development. It was established as a private limited company. The LCCA has a 19 per cent. shareholding while EDF, the commercial partner, owns 81 per cent. That is a way in which a local authority can do something about the need to improve on renewables and to look at the local production of energy. The fact remains that when we talk about green electricity, so long as the premium is paid there should be no limit for domestic use. The fact is that it is more expensive. The data on installations in social housing put the costs of solar water heaters, for example, at £600 per dwelling. It can be quite an expensive operation.
In new clause 7, I am questioning the meaning of clause 1. In practice, green energy will come from the power companies through the grid. It is unlikely to be produced locally except through microgeneration schemes. Whether a microgeneration scheme will produce enough electricity beyond the immediate requirements of the people who have installed it is another matter altogether.
Martin Linton: Is my hon. Friend aware that by encouraging local authorities to take part in microgeneration and in generating electricity locally, he is reverting to something that happened in London more than 100 years ago? Battersea borough council pioneered the setting up of local power stations long before power was taken over by such huge things as Battersea power station, which supplied huge areas very inefficiently. Returning to the original idea of locally generated power is seen as a very progressive move.
Mr. Dismore: My hon. Friend makes an important point. I suspect that when Battersea council first set up its own generating systems, it was using rather dirty coal technology.
Mr. Dismore: My hon. Friend makes that remark, but one can hardly criticise the municipal fathers of 100-odd years ago for not having foresight about what might happen through climate change because of the use of coal-fired power stations. Unfortunately, we now know what the consequences were. My hon. Friend is right. We need to think about whether local authorities can take the initiative in building their own microgenerating power stations, whether they use wind turbines or some other method.
New clause 7 tries to square the circle with clause 1, because it is open to question whether somebody who has already set up a microgeneration system would be able to provide enough power to fuel another construction. I have some problems with the way in which clause 1 is framed, and new clause 7 is an attempt to resolve those problems.
New clause 8 is probably the most important in the group. It tries to get to the bottom of what we are talking about. It addresses the costs of what the Bill will expect people to do. The issue is not the cost to the local authority, but the cost that a local authority will impose on new developments in its area. If new developments are to be required to use renewable or low-carbon sources, or to generate their own electricity, a price tag will be attached. Likewise, if they have to comply with energy efficiency standards, on insulation or anything else, that also has a price tag attached. Especially in the context of domestic developments, that price could have an impact on the provision of affordable housing in a local authority area.
If we require developers to do x, y or z, over and above the ordinary building regulations or planning requirements, they may say that they will not include the 50 per cent. of affordable homes required under other planning policies, because that would no longer be cost-effective and they could not make sufficient profit. Or developers might argue for a relaxation of the threshold for the number of properties before the 50 per cent. rule kicked in. That assumes that we will still have the 50 per cent. rule in London, as the newly elected Mayor has made a commitment to abolish it.
My concern underlying new clause 8 is the impact of the Bill on housing supply, locally and city-wide, and on Government targets. If we make development too expensive, developers will not build new houses. Solar power, for example, can cost at least 10 times as much as power from conventional sources and is relatively
inefficient, as has been found even in Australia, the land of sunshine. More generally, renewable power costs are two to three times those of conventional sources, which can put them beyond economic viability. The cost of an energy-efficient home can be between 40 per cent. and 50 per cent. more. It may be cheaper in the long run, but a £7,800 heat pump will take 15 years to pay for itself, and solar panels that cost £4,500 will take 37 years. Built from scratch, a zero-carbon home can cost some £30,000 more than a normal house, based on current technology prices.
Martin Linton: Does my hon. Friend agree that it is in the long-term interest both of the developer and of the prospective householder that a long-term attitude is taken from the start? Has he not studied the pioneering work that has been done in Sweden on imposing high standards of sustainability on house builders? Such work may take 30 to 40 years to pay off, but it is in the interests of everybody in the long run.
Mr. Dismore: I have not studied Sweden, and I know that it is one of my hon. Friend’s special subjects, so he is far more informed on it than I am. I wonder, however, whether Sweden has a chronic housing shortage like ours, and how long people there have to wait for a new home. I take his argument that we have to spend more on building new houses as an investment in the long-term future, but if the result is to make the cost of building a new home prohibitive for first-time buyers or social landlords, so we do not build the homes that we need, people will be in desperate housing need for longer. If Sweden has the same housing shortage as we do in London, I will accept his point. If, however, Sweden does not have a problem with housing supply, I can understand why it takes the approach that it does. If it had the same housing problems that we do, it might have adopted a different approach.
Martin Linton: Sweden does not have the same housing shortage as we do, although it does have a housing need, and that is a result of Government policies over the decades that have ensured that the housing supply remains in touch with demand. If we have not done that in this country and, in the process, have raised the price of existing houses, the lesson is that we should have more Government action to ensure the supply of housing at whatever level would overcome our problems.
Mr. Dismore: I agree with my hon. Friend, but it is a case of the chicken and the egg. The problem is that we have a housing shortage. Should we make that harder to resolve through these measures or not? In an ideal world, we would deal with both issues, but we do not live in an ideal world, so I am concerned about the potential impact of the Bill. In many ways, Sweden is a much better society than ours, buts its population is smaller and more cohesive for a variety of reasons.
New clause 8(a) and (b) mention
“the cost of energy from renewable sources”
“from low carbon sources”.
It is therefore important to tell the House what the price differentials for customers can be. They vary from company to company and from region to region.
British Gas has three tariffs, and the additional costs for a typical consumer vary from between £20 and £84 a year. Scottish and Southern Energy told me that a typical consumer would pay some £19.50 a year more, E.ON said it would be some £17 and EDF Energy said that it would be £14 more on one tariff and £44 on the other. One wonders why anybody would want to be on the second tariff, but presumably there is a reason. In any event, there are cost consequences for the homeowner from the requirements of the Bill. That information was provided by Energywatch.
The costs of generation are also greater. Average generation costs will give the House some idea. Onshore and offshore wind generation costs between 1.2p and 4p per kWh above conventional generation costs. That includes the emission trading scheme. Offshore wind alone can cost between 30 per cent. and 90 per cent. more. So when it comes to the cost of microgeneration, whether in a local authority scheme as we discussed earlier, or to the consumer, the Bill has a price tag attached. We have to consider on Third Reading whether the country is prepared to pay that price, insofar as the Bill affects new developments.
Mr. Dhanda: We all have energy consumption on our minds at the moment as it is so cold in the Chamber—
Madam Deputy Speaker: Order. May I reassure the Minister that I have asked for that matter to be addressed?
Mr. Dhanda: I am grateful to you, Madam Deputy Speaker, and I am sure that the rest of the House is, too.
New clause 8 would require a local authority to take into account the cost of energy from renewable and low-carbon sources. Is my hon. Friend the Member for Hendon (Mr. Dismore) referring specifically to the costs incurred by a local authority or, perhaps, to the on costs for those letting a property?
Mr. Dismore: New clause 8 deals with a series of costs. I referred to the cost of energy generation, whether that is microgeneration or related to the wider question of generation. There will be costs to the consumer living in the house, which could be up to £84 a year for green energy, but will probably be more like £20 a year. Costs will be involved in providing insulation, or whatever.
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The costs to local authorities would be those involved in policing the mechanism. I suspect that those costs would be significant and additional to the normal cost of building control. More importantly, however, if local authorities adopt the policy themselves and say, “Don’t just do what we say; we’re going to do it ourselves,” they will face additional costs when they buy, renovate or develop buildings for their own purposes. If we consider social housing, which is now more likely to be the direct responsibility of a social landlord than of a local authority, the costs could be very significant. An indirect cost could then come back to the local authority owing to the cost of homelessness and overcrowding, and all the social consequences that flow from that.
The most direct costs are those to the consumer and constructor of the new building and those incurred through the generation itself—the costs of the mechanisms. However, there are also wider costs, which are pulled together by subsection (e) of the new clause as
“the impact on the provision of affordable housing”.
A range of costs would flow from the Bill.
Mr. William Cash (Stone) (Con): While the hon. Gentleman is engaged in his filibuster, I hope he appreciates that my grave concern about foreign nationals statistics relates to a matter of great importance that affects overcrowding—
Madam Deputy Speaker: Order. I am afraid that the hon. Gentleman is out of order. We are discussing new clauses.
Mr. Dismore: Thank you, Madam Deputy Speaker. I object to the hon. Gentleman’s suggestion that I am engaged in some sort of filibuster—I am not. The Bill received minimal scrutiny in Committee, so it is important for it to be properly scrutinised and discussed now. There was no consideration whatsoever in Committee of the costs involved in bringing the Bill into effect. I am not saying that society as a whole should not meet those costs, but if the House is going to pass the Bill, it should be aware of what the costs are, so it is appropriate that I take a little time to set them out. If I was out of order and filibustering, you would be the first to stop me, Madam Deputy Speaker, because that would be against the rules of the House, of which I am well aware, although the hon. Gentleman is not.
My point about the costs of construction flows from the intervention made by my hon. Friend the Member for Battersea (Martin Linton). On the basis of information that I have received from the Parliamentary Office of Science and Technology, it appears that the additional building costs for a zero-carbon home, compared with a typical house, would be in the region of £35,000 to £55,000. The source of that figure is a December 2006 article on thisismoney.co.uk. A report for the Renewables Advisory Board estimates that the additional costs for a new development in 2016 would be an average of £6,000 a dwelling in a new development, with the figure ranging from £1,000 a dwelling for flats in a large-scale rural development—the hon. Member for Falmouth and Camborne (Julia Goldsworthy) will be glad to know that we are not going to forget rural developments—to £13,000 for houses in small developments. The process would thus be quite expensive.
The BBC recently reported that the first zero-emissions home had been unveiled. The house, which was produced by a company called Kingspan, was the first that had been designed to achieve level 6 on the code for sustainable homes. It was trumpeted that the house’s annual energy bill would be only £31, compared with £500 for a standard new home of that size. So there is a saving, through smart metering and so forth. However, the company had to admit that the building cost was 40 per cent. greater than that for standard homes.
If we are to impose those standards on developers through clause 1, the hon. Member for Sevenoaks (Mr. Fallon) needs to be aware of what the impact on development will be. If it will mean that every new home will cost 40 per cent. more, I suspect that there will be 40 per cent. fewer new houses as a consequences—well, the maths does not quite work out, but he gets the point. I have dealt with the issue of the Renewables Advisory Board, which gave an estimate of up to £13,000.
Stephen Pound: My hon. Friend touches on an extremely important point that was alluded to earlier. Does he agree that although the home owner may well be prepared to accept a green premium, as it would add to the value and the resale potential of the property, people who provide affordable housing through registered social landlords or informal mechanisms would be disincentivised by the measures? Does he feel that there is a role for central or local government support, and that some additional fiscal mechanism could be brought into play to prevent the problem from occurring? It would be disastrous if a good Bill ended up not helping people to get the homes that they want and deserve.
Mr. Dismore: My hon. Friend makes an important point. Amendment No. 12, which we will discuss after this group of new clauses, suggests that we be a little more flexible about the commencement date so that we can take account of such matters, and can consider whether we are ready to introduce the mechanisms straight away, or whether they would have the unintended consequence of reducing housing supply. That is an important consideration.
There is no doubt that new construction offers the opportunity to pump-prime new on-site technologies and develop cost-effective systems, particularly in urban areas, where we will potentially be developing at much higher densities. In Mill Hill in my constituency, we are considering a major development of about 2,500 homes, according to the latest tally, on the former Ministry of Defence site at Inglis barracks. My hon. Friend may be familiar with the site, as the British Forces Post Office has just moved from there to a site in the general direction of his constituency or a little bit beyond it, near Northolt. The point is that as part of the overall plan for the area, we were trying to see what could be done to make the development much more energy-efficient. That is the right way to go, because it is much easier to ensure energy efficiency in major, large-scale new developments than in small-scale developments.
The Parliamentary Office of Science and Technology told me that in general terms the cost of building an energy-efficient home is £1,500 per sq m; for a normal, or non-energy-efficient, home, the figure is £1,000 per sq m. The best example of what can be achieved is the result of the challenge set by the former Deputy Prime Minister, my right hon. Friend the Member for Kingston upon Hull—I forget what bit of Hull he represents—
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