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Much has been said about gas and gas storage, which I welcome. It is long overdue and should have been set in train 15 years ago. The Government were incredibly complacent over the whole issue of gas storage over the years. Some of us on Select Committees in the other House argued with the Government that it should be dealt with as a priority. We were told that if the market was left to its own devices, everything would be for the best in all possible worlds. Pangloss has little place in the energy debates and the energy markets, and has never had much of a place. I am not advocating state direction, but I am advocating facilitation, encouragement and

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incentivisation, if the profit motive is not in itself enough. However, I find it hard to believe at times that when there are all these fantastic opportunities, the entrepreneurial instincts of British business cannot rise to the challenge of building windmills or of getting their act together on what, obviously, is a very attractive and important issue; namely, carbon capture and storage.

We are told that people take their ball away in a huff if they do not receive sufficient subsidy or incentive from Government. We are receiving in a new form the old argument about backing national champions. I thought that we had left all that behind and the idea of subsidising companies to take advantage of market opportunities when these market opportunities are so blindingly obvious that even latter-day socialists like me can see that. Anyone with a bit of wit and intelligence should be able to get something going there.

Certainly, if the Government are going to have another competition it should be modest in scale and they should be selective in which of the two technologies they want to have judged. Broadly, I sympathise with the position that has been adopted. We will have to have a debate about the forms of tariff and the ROCs arrangements in much of the provision in the renewables area. We may have a fight about what is very little in terms of the respective merits of one option against another, but the Committee stage of the Bill will be helpful in this area.

I share the anxieties of the noble Lord, Lord Oxburgh, about the implications of disparate and limited, on occasions, renewable generation and the cost that that will have on the funding of the National Grid. The National Grid will have to have an alternative grid to accommodate intermittent sources of supply while at the same time having the usual motorway system to deliver the power from the baseload generators that we will have to live with in the future, whether they are gas, nuclear, or, as I hope, coal. But let us not forget that coal is an imported fuel. If we were going to restore the coal industry in the United Kingdom to even a shadow of its former state it would require degrees of training, investment and new forms of technology, the like of which we cannot begin to realistically think of at the present moment. We will have to use coal but it will not be cheap in the future. If we have the almost exponential increase in demand that we see from India and China, this is bound to impact on the price of coal at a far greater rate than we have envisaged over the past two or three years.

That brings me to my final point. Much of what we have been talking about is in the medium to long term. However, fuel poverty, about which the noble Lords, Lord Palmer and Lord Taylor, have spoken, is with us and is growing worse. It is growing worse primarily because no one anticipated the dramatic increases in gas and oil prices and the impact that they have had: a 100 per cent increase in domestic gas prices and a 70 per cent increase in domestic electricity prices.

There are 24 million households in the UK. I do not think that the figure is 45 million; it may be that

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second homes owned by Members of this place or houses abroad were lumped in. I believe that the Minister said 45 million: it is only 24 million, but it is bad enough at 24 million, because if we take England on its own there are around 3 million-plus households in fuel poverty. Some 15 per cent of households in England are in fuel poverty. That means that we have to spend in excess of 10 per cent of gross income to fund the heating bills of those households to keep the house warm or the water hot.

We know that the Government have been concerned about the matter and that tough words have been exchanged in Victoria Street. People have complained that Ministers have not been nice to these shrinking violets from the energy companies and that they have succeeded in wringing out of the energy companies an increase of £100 million this year, £125 million next year and £150 million in 2010-11. That is in contrast to the £50 million spent at the moment.

We can argue about who is to blame for the price rises and express concern about the level of profits that these companies make, but I do not particularly want to go down that road. If there is a 1 per cent increase in energy prices, 40,000 households go into fuel poverty. But if there is an increase of 2.5 per cent, 100,000 people go into fuel poverty. If it is 25 per cent it is another 1 million. At the present moment, the Government are cutting £80 million per annum for the next three years from the Warm Zones project. Somewhere down the line the Government have their priorities wrong. They are not nearly harsh enough on the utilities. It was said that if the Government did not obtain some money from the utilities they would introduce a mandatory social tariff. I do not believe that the two are mutually socially exclusive.

I believe that we need to have a mandatory social tariff. At the moment we have a free market in utility charity towards the fuel poor: a market of such inconsistency, complications and contradictions that we can have a mix and match of any one of about four or five or maybe more forms of assistance. There are price discounts and freezes, fixed price bills and forms of cold weather payments. We could have tariffs on low income households or people living in deprived areas, or occupants of fuel poor areas; households facing difficulty paying bills; all households on supplier priority service registers and then we could have the catch-all of the elderly.

It is not beyond the wit and intelligence of either the Government or the House to produce this social tariff and I hope that some of us can make common cause across the divide of the House to get a social tariff on to the statute book. We have to recognise that, even though there are six or seven major suppliers in the country, most of them are geographical in character. If they are offering a good policy in one area, the chances are that it is either not taken up by the poor or not available to them in other parts of the country. So it is incumbent on us to try to have a national gold standard by which companies can be judged. That can be the form of the social tariff.

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John Maynard Keynes said that in the long run we are all dead. In the short term, a large number of poor, disadvantaged and elderly people will die as a consequence of their inability to afford to keep themselves warm. That is one of the saddest facts and statistics that we have in the United Kingdom. It is not the severity of our winters or the inadequacy of our social benefits; it is the fact that we have a grossly inadequate housing stock, the improvement of which, in the Government’s proposals for Warm Zones, will result in reduced funding for amelioration. That is one example of the problem that we have here. We are dealing with a number of issues in a number of contradictory areas. We can talk until we are blue in the face about smart meters in the certain knowledge that it will take 10 to 12 years to run them out. The companies cannot decide which kind of smart meter they want. They do not even know which parts of the country they should start in. They do not know whether there are low hanging fruit that could be plucked quickly so that disadvantaged people could be helped. Indeed, it could be argued that those who have difficulty handling their bills and payment systems may also find it difficult to handle more complicated meters than they have now. What there is no doubt about is that if you have a prepayment meter, it is a damn sight more expensive than paying a discounted rate by direct debit. There are things we can do.

In broad terms, I support this legislation. It can be tweaked and improved, and I welcome the commitment to increases in large-scale generation and the recognition at long last of the need to secure gas supplies and build storage facilities. It was said earlier that we are trying to construct a three-legged stool. Our job at this point is to make sure that the energy leg of the stool is as strong and effective as we know it can be. I think that the Government are making a good start.

6.50 pm

Lord Teverson: My Lords, I congratulate the noble Lord, Lord O’Neill, on his speech, particularly his words about fuel poverty, which I shall move on to later. I hear his criticism of these Front Benches, which was balanced by his criticism of his own Government in certain areas. Again, I shall come to that later. One of the key impressions I have from the debate, like the noble Lord, Lord Taylor, is that the Bill is comparable with the Climate Change Bill, but there was some enthusiasm for that legislation. It might not have been that strong and a number of flaws were pointed out, but people were enthusiastic about it as marking a way forward. With this Bill, there is a lack of enthusiasm and a reluctant consent to its provisions, but, frankly, it does not go far enough and it does not meet the challenges that many noble Lords have outlined. In fact, perhaps that is why I sensed from the Minister’s opening speech that his usual ebullience and enthusiasm and urge to move forward were not evident to the degree that they have been on some of the other issues he has been involved in. I would say he is quite right in that.

It is certainly the case that a number of issues in this area, such as energy security and energy supplies,

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are quite downbeat and difficult at the moment. The noble Baroness, Lady Wilcox, mentioned the fact that one third of our energy production capacity is going to disappear over the next 20 years. We are also facing the highest oil prices in real terms in recent times. Moreover, we are moving towards net imports as opposed to net exports. Where are we in terms of renewables? We all see renewables as part of the low carbon economy future, but we know that we are near the bottom of the European league table even though we talk up our abilities in this area. We know that we will miss the Government’s 2010 target of 10 per cent; that was pretty much confirmed by the Minister. We know that even where we are trying to build renewable projects, we face equipment supply problems and that British industry has no place whatever in the supply chain. We have missed the boat in that area.

Some 50 years ago, coal provided 80 per cent of the UK’s energy needs. It is now down to 20 per cent, so the position is completely reversed. But because of the issues around gas supplies, coal is now potentially starting to rise again, and yet we do not have in place standards for how new coal-fired power stations need to be built to meet potential carbon capture in the future. I was particularly taken by the fundamental point made by the noble Lord, Lord Truscott, that we have no control at all over the supplier of a huge amount of our energy, the Russian Federation. We have no control over investment levels. British industry wants to invest, but has been gradually taken out of the equation. We see a very nationalistic and chauvinistic approach to energy supplies in the Russian Federation which is going to affect Britain and the whole of Europe.

Lastly, in terms of downbeat issues, we have the problem of timescales. Even if we get on with nuclear build and plough ahead with carbon capture and storage immediately, there will be a lag of around 15 years until those technologies come on stream. Again, that is in complete contrast to the challenges set by the Climate Change Bill where we saw ways to move forward. This leg of the stool does not come anywhere near to fulfilling what the Climate Change Bill requires. We knew it was a framework Bill and we forgave it for being that so long as it was followed by legislation on energy supplies that would fill in the gaps and ensure that we would be able to meet the very demanding targets. This Bill does not do that.

On carbon capture and storage, the Scottish plant that was originally going to be tested is no longer moving ahead. On offshore energy, the noble Lord, Lord Palmer, mentioned that Shell has pulled out of London Array. We welcome the fact that provisions for gas storage are included in the Bill, but again it is an administrative necessity that needs to happen and is not something that is going to change the world. On renewables obligation certificates, changing the weightings for different sources of renewable energy is fine, but that will not meet the challenge of sourcing renewable energy supplies for the future. Nuclear waste is also a key area, but again it is administrative. Even on legacy nuclear waste we need to move forward with those solutions.

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I think that all noble Lords have said that the key areas are those that we have left out. I will not go through them all again, but the one I want particularly to emphasise has not been mentioned a great deal: it is energy efficiency. All the studies show clearly that investment in energy efficiency measures provides the best return of all the areas that seek to tackle energy issues and carbon reduction. Energy efficiency is way ahead of renewables, yet the Bill says nothing about it. We could have used this opportunity to put into legislation the Government’s target for zero carbon homes by 2016, a target which not many people understand how to meet. We could have had a discussion about financing energy efficiency measures in a proper way because they have started to fall back in many areas. The noble Lord, Lord Jenkin of Roding, mentioned the very important point about revenues from the auction of carbon permits. Should we not ensure that the huge revenue that will come to the Government in future years really is ploughed back into energy efficiency measures?

I somewhat disagree with the pessimistic view of the noble Lord, Lord Birt, on our ability to reduce energy consumption. While I agree that it is difficult, in the 1980s the Japanese showed how you can effectively decouple energy use from economic growth. Indeed, over the past 10 years even in our own economy we have seen flat energy usage during periods of economic growth. Through energy efficiency measures we should be able to push energy reduction further, although the difficulty at the moment is the increase in oil consumption to meet the growth in transport.

I was going to say quite a bit about fuel poverty, but it has been very well summarised by the noble Lord, Lord O’Neill. The fact is that energy prices have doubled over the past five years and that, whatever the figure, many millions of people will be brought into fuel poverty. In Cornwall and the south-west, fuel poverty in rural communities presents the same level of challenge as it does in urban areas.

Ofgem may have changed its approach to many of these issues, but it needs to make its top priority the development of a low carbon society in the future. Smart meters very much tie in with fuel poverty and are, potentially, one way forward on that. I agree that smart meters are classically middle class, pushing the power to make good decisions back to consumers. That is an important part of decentralising energy-use decisions and democratising energy use. Is there not a way in which that clever technology can start to calculate for itself and find the cheapest tariffs, even for those people who do not necessarily take much interest in it day to day? That technology may be there, whether people watch their smart meter on their PC every day, or leave it there, simply to do its work every year.

One important area is the £215 pre-payment that the poor pay. As has been shown in Northern Ireland, that can disappear; it is no longer there. The other provision that is no longer necessary—and it says something that it was not in the Energy Bill—is the Merton principle, which gives local authorities the ability, in planning permission, to be far more stringent over a number of environmental and energy

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areas. The Government even resisted the Private Member’s Bill at Second Reading but, I am pleased to say, have now adopted that Bill, which will come through in parallel, and will no doubt come to this House in due course.

My noble friend Lord Redesdale has already referred to the Prime Minister’s speech in November, which I always look back to. The Prime Minister likened the fight against climate change to the reconstruction efforts and international co-operation that took place post-1945. The Climate Change Bill, with all its targets and what it wants to achieve, clearly demands that sort of concentration. The Stern report very much said, “It is great what you do over the next 50 years, but what is most important is what you do now, and over the next 10 years”. This particular Bill does not meet that challenge. From all the points that have been made, there is a great deal of consensus in this House. I only hope that we can amend this Bill in a number of ways. Many Members of the other place would be sympathetic to that. It will be necessary to do so, or there will soon have to be yet another energy Bill.

I would describe this Bill as “managerial”. It is not particularly focused or ambitious; it does not, in any way, go towards meeting the Government’s own vision on climate change. Its challenge to global warming is tepid legislation. That is a great shame. This Chamber will make a number of changes to this Bill, which will be welcomed by many people at the other end, on both sides of the House. I look forward to working with other Members of this House, from both sides, in making the changes that we have discussed today.

7.03 pm

Lord De Mauley: My Lords, I thank the Minister for introducing the Bill and the many noble Lords who have contributed such considerable expertise to this evening’s debate. It has clearly shown how complicated this subject is, and how urgent the action is needed. We were told at the opening of this Session of Parliament by Her Majesty that her Government would,

We strongly support those words, but are concerned about whether her Government have entirely delivered upon that intent with this Bill. The Bill, as far as it goes, and as many noble Lords have said, is welcome. It sets the framework for investment in nuclear power, renewable energy, and carbon capture and storage. It also lays down some necessary structures to address the issues of gas importation and offshore storage. These are all, as I say, welcome measures. Yet, we, much like the noble Lord, Lord Teverson, feel that they do not go far enough.

We appreciate that the Bill includes an attempt to address the framework for the importation and storage of gas. We are, as the noble Lord, Lord Birt, said, no longer a net exporter; we are, in fact, a net importer. Without sufficient storage, prices would continue their upward trajectory, as the noble Lord,

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Lord Teverson, mentioned, continuing to hit the poorest hardest. In addition, we would face an ever-increasing energy security risk. The noble Lord, Lord Truscott, made some important points about this risk. I would be grateful for the Minister’s view on how much of a reserve is necessary to ensure the security of our gas supply. Does he know, and if so, how should this be monitored? I hope the Minister agrees that knowing how much we need is vital, and is surely the first step to ensuring that we can get it.

As my noble friend Lady Wilcox rightly noted, the United Kingdom faces a looming energy gap. Several noble Lords have commented on the fact that about 30 per cent of our existing generating capacity will close over the next 20 years. All bar one of our nuclear power stations will be shut down. Many older coal-fired power stations will also close, compounding the problem. This means that there will be a serious gap in our energy capacity. The Bill, as I mentioned earlier, provides a framework for nuclear investment. After—it has to be said—considerable delay, the Government have finally announced that they will give energy companies the option of investing in nuclear power stations. Perhaps other noble Lords will be as interested as I was to hear what my noble friend Lord Jenkin of Roding had to say about the fact that we might now have the potential for some genuine competition in our future nuclear industry.

As welcome as the green light for nuclear investment might be—and forgive me if I appear churlish—it still seems a half-measure. This is because there is nothing meaningful to resolve the problem of the disposal of nuclear waste. The right reverend Prelate the Bishop of Chester asked how the Government would establish the cost of that. The announcement to allow nuclear investment has not been matched with any plan, or intention to develop a plan, on the deep-depositing of nuclear waste, as my noble friend Lady Wilcox and the right reverend Prelate said. The Bill claims that it will make provision for the management and disposal of nuclear waste, but as we found out from the debate on the Bill in the other place, we must wait for future legislation to address this. How do the Government expect a potential developer of a nuclear-generating site to prepare accurate financial projections—essential, as the Minister, of all people, knows, to raising the necessary finance—when it cannot work out the back-end cost? Surely the Minister would be the first to make the point that industry needs certainty if it is to make such substantial investments. There was some encouragement for us all in what my noble friend Lord Jenkin and the noble Lord, Lord Hunt of Chesterton, said, but as a country we need to get to grips with all of this. Echoing my noble friend Lady Wilcox, I ask: what do the Government plan to do if the Scottish Parliament blocks plans to build nuclear power stations in Scotland? My noble friend Lady Carnegy of Lour also raised her concerns about what the future holds in Scotland and, indeed, in each of the devolved Administrations.

Meanwhile, the British nuclear industry faces a major skills crisis. This is partly the result of an ageing nuclear workforce that is not being adequately

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replaced by graduates. According to British Energy, fewer than 6 per cent of the 100,000 people who work in the industry are under 24, with over 40 per cent of staff set to retire over the next 10 years. To make matters worse, there is the risk that skills will migrate to China, India and Russia, where demand is high and rising. According to the Nuclear Installations Inspectorate, as my noble friend Lady Wilcox noted, the migration of skills has placed a severe strain on its ability to attract the skilled employees that it requires to assess and approve the different types of reactor for which licences will be sought. The noble Lord, Lord Truscott, and several other noble Lords referred to that. What are the Government doing to address that? Half measures and too much dithering risk making it difficult to convert the good intentions behind the Bill into the power to boil the kettle.

There is another overarching problem here. How does all this fit into the framework of our obligations, both at home and abroad, to cut emissions and promote renewable energy? Despite the commitment to reduce carbon emissions by 20 per cent below the 1990 baseline, carbon emissions have risen, as has been widely publicised. We can commit ourselves to targets, but without a genuine vision of how to reach them we will end up in breach of international agreements, like the EU target on renewables, and British law, like the Climate Change Bill, which would require a 20 per cent reduction in carbon emissions in the next 12 years. Business as usual will result in failure; the noble Lord, Lord Teverson, referred to that.

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