Tim Yeo
Main Page: Tim Yeo (Conservative - South Suffolk)
Mr Tim Yeo (South Suffolk) (Con)
I begin by drawing attention to my entry in the Register of Members’ Financial Interests.
I would very much like to find something nice to say about the speech that has just been delivered by the hon. Member for Hackney South and Shoreditch (Meg Hillier). I listened carefully for 25 minutes and I could not really say that it made any serious contribution at all to the debate. It was extraordinarily churlish in tone and very ill-judged. If ever there was an issue that cried out for a bipartisan, long-term and constructive approach, it is energy policy and climate change. That was wholly lacking from every sentence of the hon. Lady’s speech.
I warmly welcome the Bill, which is a big—and overdue—step in the right direction. I agree that some details remain to be filled in, but no doubt they will be addressed in Committee. I want to comment briefly on four aspects of energy policy that relate to the Bill. The first, of course, is energy efficiency. The Bill is especially welcome because of its intense focus on energy efficiency, which has always been the Cinderella of energy policy. I have always found that to be extraordinary—it is truly the no regrets policy. Even people who do not accept that climate change is a threat to the conditions of climate stability that have prevailed in the very recent history of our planet, thereby allowing one of the most recently arrived species, human beings, to proliferate in number and enjoy phenomenal and unprecedented success, and who see no advantage, either environmental or economic, in moving to a low-carbon economy can see the merits of greater energy efficiency, which has economic as well as environmental advantages. Those economic advantages accrue to households, rich and poor alike, and to businesses.
The green deal, which is the centrepiece of the Bill, is an excellent concept, even if there remain some areas of its implementation that we would like to know more about. The principle that energy efficiency measures can be financed through savings on fuel bills is a good one that is attractive to consumers. In practice, however, although most of the energy efficiency measures needed have a large and fast enough payback to meet the golden rule to which the Secretary of State referred-that instalment payments for the improvements will not exceed the cost of the savings made-there will be some measures that probably do not come into that category. I hope therefore that the Government will recognise—not necessarily in the context of the Bill, but soon—that some further incentive might be needed to improve all the housing stock in this country. I urge Ministers, as I have before, to explore more fully how discounts on council tax could be used to encourage faster progress to a comprehensive energy efficiency process. Those discounts could even be introduced on a revenue-neutral basis.
Chris Huhne
Powers for councils to do that are already on the statute book. A number of councils have introduced incentives through council tax, which have been very effective. We do not need new powers to do that, and I think that a lot of the most go-ahead councils will do it.
Mr Yeo
I am grateful to the Secretary of State for that point. I hope that means he will encourage the use of those powers in areas in which a significant number of households are not able to use the green deal measures as a sufficient mechanism and incentive to get the improvements that are needed. The same approach could be adopted for business premises by giving discounts on business rates.
Smart meters might also help. Helping consumers to understand the costs of energy and how they can better manage their energy consumption could be very valuable, but I hope that the Government will take a close interest in the roll-out of smart meters. There is a risk that the whole initiative might turn sour if the meters do not get off to a good start, if mistakes are made or if consumers become suspicious that they are going to benefit suppliers more than consumers.
Nicky Morgan (Loughborough) (Con)
Would my hon. Friend agree with a very simple suggestion that was put to me by a constituent about smart meters—that we need the information to be understandable to the average consumer who is not an energy expert? If the meter told the consumer how much energy had been consumed and its cost, that would mean a lot more than complicated numbers and figures that one cannot understand if one is not an expert.
Mr Yeo
The test of smart meters will be how user-friendly they are at giving people information that is relevant to their decisions in a manner that they can easily understand. That includes older people who might not have as much facility for modern information technology communications.
On security, I welcome the duty placed on Ofgem to report on the adequacy of future capacity. Demand for electricity will rise substantially not just because of economic growth but because several of the measures designed to reduce greenhouse gas emissions involve the greater use of electricity—for example, for transport and heat. We shall need a lot more generating capacity and the lead times for new capacity are such that decisions taken in this Parliament are absolutely crucial. A further dash for gas might be the quickest and cheapest way to expand capacity, but it would mean becoming even more dependent on gas imports, threatening a different aspect of security of supply. Even in a world in which gas can be imported from a large number of countries and in which we have the possibility of perhaps abundant supplies of shale gas from Poland and the United States, I do not think that anyone would be comfortable with our relying more on imports.
Furthermore, unabated gas emissions are so much higher than the target for emissions that the Committee on Climate Change quite rightly set for 2030 of 50 grams per kWh that a dash for gas could lead to expensive stranded assets in the 2020s unless we achieve carbon capture and storage, which is by no means a certainty. Yesterday, in its excellent review of renewables the committee reminded us, as it helpfully and regularly does, that nearly all new generating capacity must now be low-carbon. After all, electric cars and electrically heated houses are not going to cut greenhouse gas emissions if the extra electricity is generated by coal. The committee’s review is welcome as a common-sense judgment on renewables. It reaches the unavoidable conclusion that even with an enormous increase in offshore wind and solar power there remains an absolutely essential role for nuclear. We therefore need from the Government today, and regularly in future, an assurance that as soon as any safety issues raised by Professor Weightman have been addressed, every possible assistance will be given to ensure that new nuclear capacity comes on stream as soon as possible.
In the context of how more low-carbon electricity can be produced, a more explicit acknowledgment is needed of the risks of blithely assuming that carbon capture and storage will work viably at scale. With the abundant availability of coal in many countries, lots of coal is going to be burned in the next few decades. It is beyond doubt that the single technological breakthrough that the world most urgently needs is carbon capture and storage. There is huge potential for it, but I have not been encouraged by the fact that when the UK Government offered £1 billion in a competition, there was only one bidder at the end of the process. I therefore urge that more attention be given to issues such as waste-to-energy, which could provide a renewable source as some unrecyclable waste will be always be produced by a growing economy.
Mr Yeo
I am running out of time, I am afraid, and I think I get only two goes at giving way. I am sorry.
It is clear that whatever the precise mix of our portfolio of electricity generation, the cost of secure, low-carbon electricity will be higher in future—possibly much higher—although the Government have rightly pointed out that reliance on fossil fuels might turn out to be even more costly by 2030. Last week, in an evidence session held by my Select Committee on Energy and Climate Change, I asked Ministers what the Treasury’s assumptions about oil prices would mean if they were translated to gas prices, and they were a bit reluctant to explain what they thought gas prices might reach. Clearly, fuel poverty is going to be a key challenge in the next few years and the solution is not to divert investment into cheaper but higher-carbon power stations, but to ensure that household incomes are sufficient to meet unavoidable increases in fuel bills.
Equally important is the need for more low-carbon capacity. Tinkering with UK or European Union targets for the exact proportion of energy to be achieved from renewable sources by this date or that date is of little relevance. The only real question is how Britain, in an increasingly energy-hungry world in which China and the other BRIC countries—Brazil, Russia, India—will be consuming huge amounts of energy, can attract the funds needed to finance massive new capacity in all kinds of low-carbon electricity. The Intergovernmental Panel on Climate Change has reported today that £15 trillion will be needed in the next two decades to develop renewable energy. To attract our share, we must make sure that returns on investment in electricity generation in Britain are high enough and reliable enough. I urge Ministers to recognise that every policy change runs the risk of raising the cost of capital because each switch increases uncertainty in the minds of investors. Individual decisions such as the revision of feed-in tariffs for large-scale solar projects are understandable and perhaps unavoidable, but their impact on investors is harmful and will prove to be expensive in the long term. It is vital that the electricity market reform package promotes stability in the framework of incentives that are designed to promote low-carbon electricity. I urge Ministers to recognise in all policy statements the danger that investment in new capacity in this country is not an entitlement. We live in a genuinely global economy. Investors can easily migrate to places where returns are more secure, where planning delays are shorter and where policy is predictable.
There is a lot more in the Bill, not least the green investment bank. The bank’s contribution to funding some of the investment needed could be considerable if the Treasury allows it. In view of the imminent decision about the fourth carbon budget, I want to close by making a strong plea to the Government to accept the Committee on Climate Change’s recommendations. The Government’s credentials as the greenest Government ever will be enormously strengthened if the carbon budget put forward by the committee last December for the 2023-27 period is accepted. A budget for a period more than a decade away might seem a remote concept, but carbon budgets are much less susceptible to last-minute tinkering than financial ones. Carbon emissions in the middle of the 2020s will be affected by decisions about new electricity generation capacity taken during this Parliament.
Our accepting the committee’s fourth budget will show that Britain wants to lead the way to a low-carbon world. I understand the anxieties about our competitive position, but I believe that those risks are relatively small and are confined to the short and medium term. If the world really means to decarbonise by 2050, and I believe that it does, the countries that lead the way will not only be doing the right thing environmentally, but will reap a huge financial reward.
Let us look east at what China is doing in making huge strides towards a more sustainable, low carbon transport infrastructure and energy system. In the international climate change negotiations in the 2020s it might be China that takes the hawkish stance on greenhouse gas emissions and the measures needed to reduce them, and it will do so from a position of greater strength than many countries in the west. It would be tragic if Britain, one of the first places where the science of climate change was properly understood, were not in the vanguard of the world’s response. I urge the Prime Minister to overrule the reported resistance of the Secretary of State for Business, Innovation and Skills on this point, and I commend the Bill to the House.