Energy Efficiency
The Committee consisted of the following Members:
† Barker, Gregory (Minister of State, Department of Energy and Climate Change)
† Berger, Luciana (Liverpool, Wavertree) (Lab/Co-op)
† Blackman, Bob (Harrow East) (Con)
† Blenkinsop, Tom (Middlesbrough South and East Cleveland) (Lab)
Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP)
† Freeman, George (Mid Norfolk) (Con)
† Hopkins, Kelvin (Luton North) (Lab)
† Mordaunt, Penny (Portsmouth North) (Con)
† Sandys, Laura (South Thanet) (Con)
† Whitehead, Dr Alan (Southampton, Test) (Lab)
† Wiggin, Bill (North Herefordshire) (Con)
† Williams, Roger (Brecon and Radnorshire) (LD)
Sarah Thatcher, Committee Clerk
† attended the Committee
European Committee A
Monday 30 January 2012
[Mr Mike Hancock in the Chair]
Energy Efficiency
4.30 pm
The Chair: Good afternoon. Welcome. For those who have not served on this type of Committee before, the rules are straightforward. The Clerk reads the title of the legislation. We then have a statement by a member of the European Scrutiny Committee, which normally lasts about five minutes or so. We then have a ministerial statement and questions. If the questions run out before 5.30 pm, we move into the debate; if there are more people who want to ask questions at 5.30 pm, we can continue a little longer, but it depends.
Penny Mordaunt (Portsmouth North) (Con): May I say what a pleasure it is to serve under the chairmanship of a fellow Portsmouthian, Mr Hancock?
Under the Europe 2020 strategy, member states have committed themselves to achieving a 20% energy efficiency target, but it is clear that this target will not be met unless further measures are taken. EU document No. 12046/11 is therefore designed to give legislative effect to a wide-ranging set of requirements intended to promote energy efficiency within the EU to achieve the 20% target. It would not impose binding targets, but would instead require member states to set their own indicative targets; in addition, it would impose a number of more specific obligations on member states.
The Government accept that further action to improve energy efficiency within the EU is needed if the target is to be met, so they welcome the proposed directive. They agree that there is no need at present for binding national targets, but caution against over-prescription. The Government also say that a number of provisions could require changes to the current EU policy, and although an impact assessment by the Government was not able to quantify the UK costs and benefits, it confirmed the Commission’s view that energy costs would rise in the short term, but stabilise in the longer term.
The European Scrutiny Committee saw the directive as an important piece of legislation, which despite the general presumption in favour of improving energy efficiency, appeared to have a subsidiarity implication and to impose significant burdens on business and, ultimately, energy consumers. It therefore felt that it should be debated in Committee.
4.32 pm
The Minister of State, Department of Energy and Climate Change (Gregory Barker): I am delighted to be serving under your chairmanship, Mr Hancock. I am grateful to my hon. Friend the Member for Portsmouth North for inviting the Committee to debate the directive and for the opportunity to consider this important proposal from the European Commission.
The proposed energy efficiency directive is intended, as my hon. Friend said, to put the EU back on track to achieve its 20% energy saving target for 2020. We share
the Commission’s view that there is indeed considerable potential for the whole EU, but particularly the UK, to do far more to improve energy efficiency. Realising that potential will deliver significant benefits not only in emissions reductions but in improved competitiveness and new jobs throughout the European Union. We are certainly doing our bit here in the UK: the coalition Government are committed to delivering improvements in energy efficiency across all sectors of the UK economy through the development of innovative new policy approaches, such as the transformational green deal.Our energy efficiency agenda goes much wider than just the green deal: it is now to be embedded in our electricity market reform proposals; and, I am pleased to say, next month we will formally launch the energy efficiency delivery office within the Department, pulling together all the strands of energy efficiency policy that for too long have been scattered not just across the Department but across Government. At long last, within the machinery of Government energy efficiency will be able to pull its weight alongside the deployment of renewables, nuclear, oil and gas. That reflects the welcome recognition within Government that energy efficiency is the agenda that needs to be pushed forward the hardest within the Department of Energy and Climate Change.
We are also committed to moving the EU towards a more ambitious greenhouse gas emissions reduction target for 2020. Making progress toward the EU energy saving target can play an important role in realising that ambition. Indeed, the Commission’s low-carbon road map to 2050 clearly states that if the EU meets its 20% renewables target and achieves a 20% energy saving by 2020, that will in turn enable the European Union on its own to achieve a 25% emissions reduction by 2020. Given the potential for further improvements in energy efficiency and the clear links to our wider climate change objectives, we welcome the directive and are keen to ensure that a high level of ambition is retained as negotiations progress.
Prescription versus flexibility is an issue, though. Of course there are many different policies and measures that can be deployed to deliver the savings needed to match our big ambitions, but we need to be conscious that, in many cases, what works in one member state may not necessarily be the best solution for another. In that context, it is fair to say that the Commission’s proposal is—I am afraid to say—highly prescriptive, with a one-size-fits-all approach taken in far too many articles, which in turns means a worrying lack of flexibility for member states to design policies that fully respect national circumstances.
It is true that many of the directive’s requirements are broadly consistent with the policy framework here in the UK—indeed, some elements clearly looked to the UK’s framework for inspiration—but some provisions have the potential to cut across the grain of both existing and planned domestic policies. Our negotiating position within the European Council has therefore been to ensure that while encouraging ambitious action across the EU, we minimise any disruption to our own domestic framework and to key programmes such as the green deal and the roll-out of smart metering. That entails seeking a far greater focus on outcomes, at the expense of prescription about how such outcomes should be achieved.
It is also vital that the directive’s requirements are subject to a proper assessment of cost-effectiveness. An approach that makes economic sense in one sector or location may not always do so in another. Similarly, we need to ensure that the core principle of subsidiarity is fully reflected. Many policy interventions are best made at the national or local level, rather than being mandated in the EU. For example, with other member states we have made clear our belief that it is not appropriate to impose requirements relating to the siting of energy infrastructure in this directive, as that is quite rightly the domain of national or local spatial planning regimes.
The directive contains a range of requirements impacting on both demand side and supply side energy efficiency. The requirements apply within a framework that requires member states to set themselves an indicative national energy saving target for 2020. On the demand side, there are provisions requiring member states to meet targets for the deep renovation of public buildings and to place greater focus on energy efficiency within public procurement processes. As is clear from the challenging emissions reduction target we have set ourselves for the Government estate, we share the view that the Government have an important leadership role to play, which is why we committed to and exceeded our target for 10% emissions reductions in Government buildings last year. We are not convinced, however, that a deep focus on renovation to the exclusion of all other energy saving measures is the most cost-effective means of delivering progress.
Member states are also required to meet a final energy consumption target through placing an obligation on energy suppliers to deliver savings, or through alternative but equivalent approaches. The requirements for supplier obligations draw heavily on successful UK programmes such as the carbon emissions reduction target; nevertheless, we are working to ensure that the provisions are consistent with our plans for the future energy company obligation that will operate alongside the green deal. Also impacting on the demand side are requirements for audits for large companies and a range of provisions related to billing and metering. In those, we are seeking to ensure consistency with domestic programmes in the business sector and the roll-out of smart meters in the UK.
On the supply side, the directive contains a range of provisions to promote the development of co-generation, or combined heat and power as it is more often known,. There are requirements that relate to the siting of new generation plant and industrial facilities near heat demand points and to the fitting of necessary plant and equipment to such facilities to allow the recovery and use of heat. We share the ambition to increase the deployment of CHP and to promote waste heat recovery, both of which can make a significant contribution to meeting our carbon budgets. However, while a greater presumption in favour of CHP is welcome, we need greater recognition at the individual project level that the economic case must stack up and any investment must be cost-effective. As I mentioned, we are also opposed to siting requirements that have the potential to cut across the UK’s spatial planning regime. Also on the supply side, the directive seeks to promote energy efficiency improvements in the gas and electricity transmission and distribution network, with a range of requirements that are broadly consistent with the existing regulatory framework in the UK.
In the negotiations to date, I am pleased to say that we have made substantive progress in addressing the concerns I have highlighted. For example, requirements for buildings in the public sector have been refocused on the desired outcome—energy savings—rather than on prescribing the means of achieving them. We have also secured much greater recognition of the importance of cost-effectiveness and technical feasibility in the metering and billing provisions and in co-generation. Finally, we have succeeded in removing those elements that had the potential to conflict with our spatial planning regimes.
Where do we go from here? Denmark has stated that achieving early agreement on the directive between the Council and the European Parliament is a key priority for its presidency of the EU. We support that ambition, but we recognise that achieving such an agreement will be challenging. Much will depend on the Parliament’s position, and indications are that it will push for a far more prescriptive directive that seeks further to constrain the policy choices open to member states. I will of course keep the Committee fully informed of progress as the negotiations proceed; meanwhile, I look forward to discussing the Government’s approach with the Committee this afternoon and to listening to colleagues’ ideas and comments.
The Chair: We now come to questions. Who would like to be the first person to ask a question?
Kelvin Hopkins (Luton North) (Lab) rose—
The Chair: Kelvin Hopkins is hopping up.
Kelvin Hopkins: It is a pleasure to serve under your chairmanship, Mr Hancock, and to speak on these important matters. I accept entirely the Minister’s emphasis on national policy as opposed to EU policy. In some ways, we would hope to be ahead of EU policy, given the urgency of energy issues. Does he accept my concern that there is still pressure from the energy-producing companies to serve their interests rather than the country’s? The previous Government had serious problems with being lobbied privately by energy-producing companies against such things as microgeneration. Is there still a problem with pressing energy companies to accept that insulation and other energy efficiency measures are the way forward?
Gregory Barker: I understand the hon. Gentleman’s concern, not least because this has clearly been a problem in the past, but I believe that the overall climate in energy efficiency policy is changing. There is broad recognition in the Government and outside that the time for energy efficiency advances has arrived. I have had no conversations with the big six energy suppliers in which they have approached me about the directive. I am to meet them shortly to discuss their concerns about the implementation of specific schemes—the carbon emissions reduction target and the community energy saving programme—but by and large I am pleased with the degree of buy-in to the energy efficiency agenda.
This is not just about the big six, however, and we are not talking only to them. It is about the consumer, about underpinning British competitiveness and about the real opportunity not only for the consumer from the
roll-out of the green deal, but more widely for the British economy from electricity market reform. We have not really begun to discuss that in the House, but when we do the hon. Gentleman will see the sea change in our placing energy efficiency alongside the traditional means of power generation. That has been a substantial change, but we have more to do on that.The Chair: There is a slight energy deficiency in this room, which is rather cold. I am sorry for that.
Gregory Barker: Admirably chilly.
Kelvin Hopkins: The truth is, of course, that the big six make their profits from selling energy rather than from finding ways of reducing energy consumption. How far are the Government pressing the energy companies to get into the business of alternative microgeneration, renewables and indeed insulation, because if they have a genuine and profit-driven interest in such measures, they might invest more in energy efficiency?
Gregory Barker: Absolutely. Government programmes, such as CERT and CESP, place substantial obligations on the energy companies, but they push them in a direction in which the market tells them not to go. Exactly as the hon. Gentleman says, we have to change the market fundamentally to make it profitable and attractive for companies to pursue energy efficiency and to align their interests more perfectly with those of the consumer for using less energy. The creation of a market in energy service companies—ESCOs—is designed to do that, and I am glad to say that that market is growing. When they come before the House, the electricity market reform proposals will be very radical in that, for the first time, energy efficiency projects—demand reduction—will be able to compete for investment alongside new generating assets, such as power stations.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): It is a pleasure to serve under your chairmanship this afternoon, Mr Hancock.
I have two brief questions. I listened carefully to the Minister’s concerns about prescription, but will he assure the Committee that the UK will push for binding targets at the highest national level during future negotiations? What does he want those targets to be, and will he update the Committee on what progress has so far been made?
Gregory Barker: Our big target is our 30% commitment by 2020. To be honest, the UK is the front-runner in Europe. We have allies, such as Belgium and Denmark, while Germany is a potential ally but is not as adamant as we are about 30% being the way forward. There is an opportunity under the Danish presidency for us to push our agenda. We have to be very clear and to make a much stronger case that energy efficiency is aligned with economic recovery and, as my hon. Friend the Member for Portsmouth North articulated, need not lead to concerns about added costs. We have to ensure that the
implementation of the directive’s detail produces cost savings and incentives for companies rather than obligations that would increase net costs.Luciana Berger: I will come back to those points in my speech. In his letter to the Chair of the European Scrutiny Committee on 22 November, the Minister wrote that the UK Government will
“be seeking to maintain a high level of overall ambition during the negotiations”.
He touched on that in his opening remarks, but will the Minister kindly embellish and clarify what he means by “a high level”?
Gregory Barker: By a high level of ambition, I mean the overall target that is implicit in the directive. We are not trying to have subsidiary targets or to be prescriptive about how they are delivered. I do not have—or, at least, I cannot spot—a copy of that letter in my comprehensive bundle, but I will comment further on it in my closing remarks.
Bob Blackman (Harrow East) (Con): I have listened to the Minister with some interest, although I freely confess that I have not read that tome in its entirety. Will he enlighten us about the current relative performance of the UK on energy efficiency compared with our European neighbours? If, as he says, our performance is outstanding, should the negotiations lead to a position where those performing well can make their own decisions on how to achieve the outcomes and those performing badly can have greater prescription?
Gregory Barker: I am afraid I am against greater prescription in all cases. The fact is that the UK has—or, to be clear, is formulating—the most ambitious policies. We started from a very poor base, certainly for household efficiency, in that we have some of the most inefficient buildings in Europe. Our overall industrial energy efficiency is not bad at all, but there is always room for improvement. I come back to the principle that the right course of improvement for one country might not necessarily be right for another. In any case, I would not like to see greater prescription coming from Brussels.
Dr Alan Whitehead (Southampton, Test) (Lab): May I ask the Minister about the co-generation elements in the proposed directive, which he, both today and in response documents, has indicated is over-prescriptive in his view and appears to set a limit on co-generation at a lower level of 20 MW rather than at 50 MW, as he would prefer? Does he not accept that if one is to be in favour of combined heat and power, then logically one should be in favour of the fact that combined heat and power can deliver some heat from where the power arises? If directives are made that require combined heat and power to be available, but there is no heat load for that combined heat and power to go to, they are empty directives. Therefore, to seek to amend proposals which merely link the two—that there should be CHP, which the Minister accepts is a good thing, and that the CHP should be meaningful—appears to undermine the principle that he has enunciated on CHP. Does he have any comment on the proposed directive and how the UK Government are responding to it?
Gregory Barker: Indeed. As ever, the hon. Gentleman is spot on with his analysis of this important CHP point. It does not make sense to generate heat—or, at least, to produce excess heat—where there is no economic use for it. The UK’s energy infrastructure policy is based on national need and energy security, but we encourage the use of CHP. We do not, however, require it in circumstances where developers have not or cannot identify a commercial use for it.
It is important that the directive only requires the provision of CHP where it is cost-effective. Cost-effectiveness is an important safeguard. We do not have spatial planning or location requirements in the UK, though current policy encourages local planners to look for opportunities to co-locate potential heat customers with heat generators. I hope that, within the context of the coalition’s energy policy, we will see a far greater emphasis on CHP. We certainly have to improve the deployment of CHP from what we have seen in the previous decade. We want to see a number of changes made to the directive, to avoid any unwarranted interference with, or burdens on, the UK’s town and country planning regime. To be clear, we want to encourage CHP, but we do not want white elephants.
Dr Whitehead: Does the Minister accept that the definition of cost-effective, which, as he pointed out, is in the proposed directive, could be directly applied to the possible emergence of white elephants, as opposed to properly working CHP plants? He has directed us to the solution to the problem, which may appear in the directive: a CHP plant with delivery of heat has to be reasonably cost-effective. Siting considerations, therefore, do not necessarily need to stand apart from UK Government policy in that respect. Would he be interested in rethinking his possible objections to that particular part of the proposed directive in the light of those considerations?
Gregory Barker: I do not think that we are as far apart as the hon. Gentleman seems to think. We think that cost-benefit analysis is an essential part of this directive. We do not believe that the cost-benefit analysis required by the directive will be onerous for developers. Although the requirement is to be CHP-ready, in keeping with existing national policy plants above 50 MW, the de minimis proposed in the directive is much lower at 20 MW of thermal input. We are seeking to ensure greater consistency with other regulatory regimes, notably the industrial emissions directive. We are negotiating to bring the EED requirements more into line with current development consent requirements for electricity generators. At the heart of that there must be a clear economic case and cost-benefit analysis.
Kelvin Hopkins: Other factors that I would hope must bear on Government policy and Ministers are, as mentioned in the papers before the Committee, the continued dependence of the EU’s energy on heavy imports, with rising prices, the threat of peak oil and issues with importing energy from countries that are not as friendly as perhaps they might be. All those factors emphasise the need to generate as much domestic energy as possible and to use energy as efficiently as possible. Do those factors bear on Government policy? Are the Government taking sufficient account of all those important factors?
Dr Whitehead: Regarding the burdens that the proposed directive might impose on business and, ultimately, consumers, as the Minister’s departmental memo sets out, does he accept his own Department’s analysis of the impacts of energy and climate change policies on energy prices and bills, published just a little while ago? Regarding his policies, particularly on energy efficiency and household bills and burdens, it stated:
“By 2020 households will, on average, save £94…on their energy bills compared to what they would have paid in the absence of policies. The impact of policies in helping people to save energy, or use it more efficiently, is expected to more than offset the impact that policies delivering low carbon investment will have on energy prices”.
That was from his departmental report on UK energy efficiency policies, which, as stated in the document, are underpinned by the directive, drawing largely from, among other things, UK energy efficiency policy initiatives such as CERT. Bearing those two points in mind—
The Chair: Order. You are getting close to making your speech. We need a question.
Dr Whitehead: I am coming to a question. In fact, I was trying to ask a question.
The Chair: It was a nice lead-in, but I think it was a little over long.
Dr Whitehead: Bearing in mind those two points, does the Minister agree that a directive that places a great emphasis on energy efficiency and the savings thereof should be fully supported, rather than attempts made to mitigate its impact?
The Chair: I call the Minister to reply to the question, rather than the preamble.
Gregory Barker: I assure the hon. Gentleman that we are fully in tune with the ambitions of the directive. We think that there is a lot more, not least in the UK, that we can do to drive energy efficiency. He is absolutely right; if we are to mitigate the impact on consumer bills, we need to have a transformational leap in energy efficiency, not through CERT, but through the green deal and particularly through electricity market reform. We will also need a Europe-wide increase in energy efficiency of consumer appliances, which will have a big impact on bills by decreasing dramatically the amount of electricity that television sets, fridges, ovens and so on use.
We have a high level of ambition, but we want to ensure that each member state has maximum flexibility to apply that ambition in the most appropriate way. We certainly would not have such an ambitious suite of policies and such innovation in policy here in the UK if we were taking that direction from Brussels. We want Brussels to set the ambition, but leave the implementation as much as possible to member states.
Roger Williams (Brecon and Radnorshire) (LD): It is a great pleasure to serve under your chairmanship, Mr Hancock. I fully the support the Government’s
approach to the regulation, but there is considerable opposition to the use of biomass for coal-firing by people who would like to use that biomass—woody biomass in particular—for other products, such as furniture. Will that hinder the Government’s approach to meeting their targets?Gregory Barker: I understand the hon. Gentleman’s concerns, but I assure him that the document relates to energy efficiency, not renewable energy. Nothing in it would substantially impact on a choice between types of biomass, or the uses of biomass. It is about saving energy rather than creating it.
Kelvin Hopkins: Very simply, I think the Minister is saying that the Government will not be held back by the directive, which should not inhibit them in whatever they wish to do, but that neither should it be regarded with reluctance, as a minimum to which we would measure up but not go beyond.
Gregory Barker: Absolutely. We have a high level of ambition. We want to ensure that the directive secures improvement in energy efficiency in member states and puts the EU on the path to a 20% target; we are clear about that. There should be greater flexibility among member states to come up with energy efficiency regimes and sets of policies that are right for them. We do not think that Brussels is the right place in which to take those decisions.
Dr Whitehead: The UK Government are making efforts to narrow the scope of the 3% renovation rate proposed for public buildings to central Government buildings only, and to set a minimum threshold of 500 square metres; that would exclude, among other things, social housing, which was originally meant to be in the directive. Does the Minister accept that that seriously undermines the effect of the Government’s green deal, the energy company obligation and the investment certainty that might be engendered as a result of the implementation of the relevant part of the directive?
Gregory Barker: Once again, it is prescription rather than ambition that we take issue with. From my experience of leading the charge on the reduction of emissions across the Government estate, I know that different types of building in different parts of the country with different age profiles have very different requirements. There is not a one-size-fits-all energy efficiency requirement. The level that we have set in the directive strikes the right balance between taking on an ambitious range of buildings on which we know we can deliver and setting ourselves up to fail.
Motion made, and Question proposed,
That the Committee takes note of European Union Document No. 12046/11, relating to a draft Directive on energy efficiency and repealing Directives 2004/8/EC and 2006/32/EC; and supports the Government’s view in welcoming the overall level of ambition of the Directive, whilst rejecting unnecessary levels of prescription, and seeking full compatibility with key United Kingdom policies.—(Gregory Barker.)
5.2 pm
Luciana Berger: I do not wish to delay the Committee longer than is necessary. It is clear that there is some support for the directive’s aim, but there are also shared concerns about the prescriptive nature of some of the proposals in their current form.
We know the scale of our task in tackling climate change, and the only way that we can hope to carry out that task is by acting together on a global scale. The need for a European target is clear. The Climate Change Act 2008, passed by the Labour Government, binds us to cutting our domestic carbon emissions by 34% before 2020. It is only right that our European partners act too. However, we agree that in its current form, the directive might risk placing undue burdens on business and Government without a clear cost-benefit case being proved, so I shall focus on a few areas in which improvements could be made to the directive, alongside those improvements that the Government are considering. I hope that the Minister will respond to my points.
Many consumers are bewildered by their energy bills. People can choose from more than 400 different tariffs, so the energy market is already over-complex. Bills that are difficult to understand only compound the situation, preventing consumers from working out the cheapest deals or checking if they have been charged the correct amount. The consumer group Which? has found low levels of switching supplier among consumers, 60% of whom say that they have never switched. Too many people—75% of British consumers—are on their suppliers’ default standard tariff when they could be getting a cheaper deal. A potential 11.5 million households do not benefit from the savings that would result from changing their payment method to direct debit, and more than 1 million could not do so even if they wanted to, because they do not have access to a bank account.
The Minister will be aware that in 2009 the European Commission led a working group on billing that included consumer groups and industry. The group produced a model energy bill. Have the Government considered pressing for the energy efficiency directive to make the Commission’s model energy bill mandatory in member states?
The Minister referred to smart meters. Alongside clearer energy bills, smart meters could lead to a more open and competitive energy market. Giving consumers clear information about their consumption should empower them to engage properly with the market, and to shop around for the best deal. The current aim is for all British homes to have a smart meter by 2019. That roll-out is a huge task, and it is estimated that it will cost in the region of £11.7 billion. As the cost is set to be paid through bills, many consumer groups are concerned about the limited transparency regarding the costs and benefits to bill payers; no doubt the Minister will have noted the recent Public Accounts Committee report on the subject. What scope does he see for amending article 8 to include requirements for cost reporting on the smart meter roll-out to ensure that it is carried out in a fair and cost-effective manner?
The presidency conclusions of the European Council of 4 February 2011 noted that more action is needed by all EU states if the 20% reduction target is to be met by 2020. I wish to impress on the Minister that it is vital to ensure that negotiations on the specifics of the directive
are not used by those opposed to combating climate change as an excuse or a tactic for delaying action altogether. I was heartened to hear the Minister’s commitment to the 30% target only a few moments ago, but I think that many of us here would not want a repeat of the scenes in the European Parliament on 5 July last year, when 16 Conservative MEPs voted against increasing the EU’s carbon target to a 30% reduction by 2020. The motion was defeated by five, despite it being a key pledge of the coalition agreement. With consensus on a binding global agreement to limit emissions not likely in the immediate future, progress in Europe is vital, as regards member states reducing emissions and the EU as a bloc playing a global leadership role. Given the importance of cross-party consensus to making progress on climate change, can the Minister tell the Committee how the Government will ensure that their own MEPs do not obstruct Government climate change policy in future, either here or in Europe?In conclusion, we are broadly in agreement with the Minister’s approach on this matter, but I am nevertheless grateful for the chance to raise a few points, and I look forward to his response.
5.8 pm
Dr Whitehead: Briefly, I want to emphasise the key points in the proposed directive. Opposition to elements of the energy efficiency directive, and questioning some of the directive’s prescription, may be valid. However, we could end up with what the Minster and everybody in this room would think a very bad result if the aim of having a less prescriptive directive meant that we ended up with a cross-Europe directive that represented very little progress indeed towards energy efficiency across the board and within member states. We must reach targets and ensure that the two sides of the problem—carbon emissions reduction in energy supply, and efficiency—are both met equally. I am concerned that some of the positions being taken, and some of the alliances being sought, to remove some of the prescription in the energy efficiency directive could have that result if we are not careful.
I therefore urge the UK Government to be on the side of the angels as far as the directive is concerned, and to support the framework of energy efficiency saving in the round. I urge them to support the aim of producing energy supplies in the most efficient way possible. That includes CHP and efficient methods of delivering energy. They should support the idea that, overall, consumers benefit in the end from a far greater level of energy efficiency, whether or not it produces burdens on suppliers. That is outlined in the directive and supported by the Minister and the Government in their analysis of the long-term benefit to consumers of energy efficiency schemes pursued over a period of time.
I hope, therefore, that as discussions proceed, the UK Government can play a constructive role in ensuring that the central points of the directive are maintained. After all the processes are ended, I hope that we get a directive that takes us towards a far more energy-efficient Europe, rather than one that allows a number of different speeds—and, indeed, in some instances no speed at all. Some may be applying no speed in the name of less central direction, but others may possibly want to ensure a gain for those who do not wish to see energy efficiency at the heart of policy over the next 20 years.
5.11 pm
Kelvin Hopkins: I support what my hon. Friends the Members for Liverpool, Wavertree, and for Southampton, Test, have said. I do not object to prescription, as long as it takes a progressive rather than reactionary direction. For too long in the past—I used to go to meetings in the European Union in a previous life—the emphasis was on markets: markets would decide everything without any kind of intervention. The world now is too insecure and too dangerous just to leave things to the markets. Interventions by Governments, individually and collectively, are appropriate. If the directive pushes some Governments in a progressive direction that they would not otherwise have gone in, then that is acceptable.
I hope, however, that the directive does not act as a brake on some more progressive member states that want to go beyond what the directive suggests. Indeed, I hope that Britain takes a lead on all this. Rather than having 20% reductions, why not have reductions of 25% or 30%? Let us show the way ahead, rather than lagging behind as we have done in the past.
In other areas of energy policy, the fact that, for example, Germany has 300 times more installed solar capacity than Britain is a disgrace. On renewable energy, we were the third worst in Europe behind Malta and Luxembourg. We were at the bottom of the league table. That is a disgrace, and I hope that is being rectified. Just before the election, my right hon. Friend the Member for Doncaster North (Edward Miliband), the leader of our party, was doing good work in that direction, but he was frustrated by the energy companies, and by official resistance to the kind of progressive policies that he wanted to pursue. I like to think that the Government, even though they are not of my party, are moving forward in a progressive direction.
I mentioned dependence on imports, and the dangers of relying in the longer term on countries that may be unstable and unfriendly for gas, oil, and possibly even coal. The more we can generate our own electricity internally in whatever way, and the more energy we can avoid using through insulation and energy efficiency measures, the better. The more independent and secure we become, the better it will be for us all. I think other countries should pursue similar policies, too. We need massive increases in investment in insulation. There are measures that are moving us forward, but nowhere near fast enough.
Another concern many of us have is fuel poverty. Many elderly people live in cold houses that they cannot afford to heat. The death rates from cold rise when energy prices rise. The more we can do to prevent that unacceptable and undesirable level of deaths among elderly people, the more civilised a country we are. Aerial photographs of a large former council estate in my constituency show glowing red roofs from which energy is escaping. One reason for that, of course, is that the council houses were sold; the people who live in them are not wealthy and cannot afford to insulate their homes. The Government should take the initiative and drive forward, ensuring in the first instance that the homes of the least well-off are properly insulated, that fewer people die and that more people can live a reasonable life without suffering fuel poverty. The country would also then use less energy and be more energy efficient. Fuel poverty should drive concerns about insulation.
I am unlikely to be in government, but if I were I would take a more interventionist—one might even say socialist—approach and just do it. If it costs money, so what? We will spend the money anyway. We spend vast sums subsidising one of our energy producers. If nuclear power had not been subsidised to the tune of many billions of pounds—there are plans effectively to subsidise nuclear into the future—and we used all that to insulate our homes and buildings, we could have saved at least the amount of energy that nuclear will produce. That would be a much better way forward. Even at this stage, if the Government and my party could be persuaded that heavy insulation of every building in the country was a much better way to spend Government subsidies on energy than producing nuclear power, I would agree with that.
We have a lot to learn from Germany, which is much more interventionist in its approach to energy, putting pressure on the energy companies to accept microgeneration, renewables, solar power and so on. That would be my preference. There are other ways to save energy. One of my particular concerns is energy-efficient transport. I look forward to a world of large-scale solar photovoltaics for charging our cars. The sun does not shine at night, unfortunately, but we can charge our cars and electric vehicles using solar power; that would be a positive step forward. I have close connections with Vauxhall at Luton, one of our local companies, and had the pleasure of driving its impressive electric car. I would like to see many more such vehicles on our roads.
I have a particular interest in freight—rail, as opposed to road. In terms of emissions and energy efficiency, rail freight is massively more efficient than road freight. The emissions from heavy freight are 12 times higher per tonne mile on road than on rail. If we invest heavily in rail freight and get millions, possibly billions, of tonnes of freight off our roads and on to rail—particularly long-distance freight going through the channel tunnel—we could save an enormous amount in emissions and be much more energy efficient. I have spoken in the Chamber many times about investing in rail freight, and having dedicated rail freight capacity that enabled us to take lorries on trains; about double-stacked containers; and about taking continental-gauge trains through the channel tunnel, so that we can take heavy rail freight all the way from Rome to Glasgow, or wherever we choose. We do not constantly have to transport freight by road.
Finally, I come to economic recovery. I take a different view from the Government on how we solve the deficit problem.
Gregory Barker: Spend more money.
Kelvin Hopkins: Well, indeed. Those hon. Members who understand a little about Keynesian economics know that by spending a small amount of money, through the multiplier effect there is enormous growth, out of which there are savings on taxation and benefits payments. The example that I have used many times—
Kelvin Hopkins: Greece is having austerity forced upon it, as is Italy, and it is not working. In the 1920s we had the so-called Geddes axe. After the first world war,
there was a big deficit, so the Government chose to cut public spending. What happened was that we had high unemployment throughout the 1920s, low growth and the deficit got bigger not smaller. Indeed, a similar thing happened in the early 1930s before Keynesian policies were eventually and sensibly adopted by Governments and we drove ourselves out of depression. Sadly, by then, Germany had twigged that one way to regenerate an economy was to build up arms, and we had a war as a result.I believe that the Government have got it wrong, and that is not just my view. Paul Krugman, Stiglitz and other great economists and Nobel prize winners also say that the Government are wrong. That is demonstrated by the fact that the deficit and unemployment are now going up rather than down. We could use—
The Chair: Order. I do not normally interrupt, but you have had a good run round the houses on this one, Kelvin, and it is about time that you meandered back to what is before the Committee and came to a conclusion.
Kelvin Hopkins: Thank you for your admonition, Mr Hancock. I am coming to my point, which is that heavy investment in renewable energy and in insulation might help to regenerate the economy, but that has to be driven by the Government, and I want to see them move in that direction.
The Chair: As no one else wishes to speak, I call the Minister to respond.
5.21 pm
Gregory Barker: Thank you, Mr Hancock. We have heard views ranging far and wide on the proposed energy efficiency directive. I am grateful to all Members who have contributed, and I shall briefly respond to their points.
I assure the hon. Member for Southampton, Test that not only the angels but motherhood and apple pie—not excluding others—are on the side of the coalition, but we are certainly flexible about how the directive is implemented. I reassure him that we are not flexible in our ambition, which is to have a high level of deployment. We certainly believe that, as the hon. Member for Luton North pointed out, if it is properly framed, the directive will drive member states to deploy a higher level of energy efficiency than they otherwise would have done.
I agree with the hon. Member for Luton North that there is clear market failure in the climate change agenda. There is a role for Government direction and for regulation, because we have to meet milestones that are external to the market to bring down carbon emissions at a rate that is consistent with the science, not with the market. We need, however, to galvanise the private sector, with its innovation and investment potential, on our side. Although we set ambitious public policy goals, we want to do so in a way that galvanises the private sector to rise to the challenge, rather than inhibiting it from doing so.
We can learn many things from Germany and I hope that, when I publish my proposals for a reformed feed-in tariff mechanism, we will learn much from the experience there. We should, however, be a little cautious and remember that the subsidy has meant that German
energy prices are considerably higher than ours. I am sure that the hon. Member for Luton North is not suggesting that we should act in a way that pushes up prices for consumers. Where we agree is that we need to focus on helping both domestic and industrial consumers, by driving down their usage of energy without impacting, at home, on their warmth and quality of life or, in business, on their competitiveness. We can do that with the much more aggressive energy efficiency policy of the green deal, which embodies many of the ambitious high-level goals that the hon. Gentleman said he wanted, and with our electricity market reform proposals. If we can frame the directive properly, it will also play a part in driving an ambitious level of energy efficiency and helping to reduce bills.Kelvin Hopkins: I thank the Minister for giving way again. Before the last election, the big six energy companies were privately resisting feed-in tariffs. The Government were reluctant to go in that direction for some time, until it was pushed through by my right hon. Friend the Member for Doncaster North, who is now the leader of my party. We might have had feed-in tariffs much earlier if we had accepted the way that Germany operates. The Minister talked about the private sector, but EDF was one of the companies that resisted. EDF is one of the big six, but it is 85% owned by the French state, so even some of the public companies have not been behaving well.
Gregory Barker: On a point of clarification, the reason why we have feed-in tariffs is not because they were pushed through by the Leader of the Opposition when he was Energy Secretary—he actually voted against feed-in tariffs—but because the then Labour Government were defeated by a prescient combination of Liberal Democrats and Conservatives. Unfortunately, the model that the then Secretary of State put in place had many shortcomings, and I will publish my reform proposals shortly. We, along with all other parties in the House, share the ambition for the potential of microgeneration and decentralised energy.
To return to the core detail of the directive, the hon. Member for Liverpool, Wavertree has asked about smart metering and billing. I assure her that the Office of Gas and Electricity Markets is currently consulting on reforms to bills. We share that ambition and are taking a close interest. Members have been working with me in a constructive way, and I expect the shape and look of bills to change. They are far too complex and, as the hon. Lady has said, there are far too many tariffs. Unfortunately, the number of tariffs rose substantially in the last few years of the previous Labour Government. We need to reduce the number of tariffs to make it easier for consumers to navigate their way to the best deal, and we need much simpler bills. We do not need more information; we need clearer information and greater simplicity, which is what the consumer is really after.
The energy market and cost benefits associated with metering and billing have not changed significantly since the directive was laid, so we do not agree that new, more prescriptive requirements are needed. Requirements for more frequent billing are unnecessarily prescriptive, so that should be for member states to determine. We have made welcome progress in curtailing some of the more prescriptive requirements in the directive, while welcoming the overall support for smart metering and billing reforms.
It is vital that the directive strikes a sensible balance between prescription and the need to provide member states with the flexibility that is needed for successful policy and design and implementation at national level. We will, therefore, continue to pursue a directive that facilitates and encourages ambitious action throughout the European Union—I hope that the hon. Member for Southampton, Test will continue to push us on that; it is right that he does so—while not constraining the policy choices open to member states.