Thursday, May 12, 2011

Energy Bill will fail to deliver Green Deal - MPs

External insulation being applied on a 'hard to heat' concrete panel council house

The Government's Energy Bill came under attack at its second reading in the House of Commons on Tuesday for being great on rhetoric but short on the kind of detail which will get the job done on time.

Fifty pieces of secondary legislation are expected to provide the detail needed, MPs said, which is currently missing in the draft and will delay its implementation.

The Bill, which contains measures to introduce the Green Deal, offshore oil and gas and energy reform, nuclear power and more, has strong cross-party support in principle.

Chris Huhne called the Green Deal - the centrepiece of the Bill but not now due to be introduced until October 2012 - ″the most comprehensive energy saving plan in the world".

The UK has oldest and least efficient buildings in Europe and they are responsible for 27% percent of the country's greenhouse gas emissions.

Huhne said that so far energy efficiency has passed under the radar, resulting in 」2-」3 billion being wasted every year. "That is gas and oil imports, so the Bill is good for energy security as well."

For the first time, Huhne put a figure on the amount that could be offered under the Green Deal - up to 」10,000. He said that British Gas pilot schemes have shown that householders who do take the measures can cut bills by up to 45% or save 」400 a year.

"Homes and businesses will be included," he said, ″backed up with a watertight legal framework. Householders will pay nothing up front. It will be paid for by savings on the bills. The energy suppliers must support consumers in doing this.

The private rented sector is the hardest to change. But Huhne said that with the Green Deal, "landlords will face no upfront costs and their properties will be improved. They have welcomed the Bill. From 2016 any tenant asking for landlord's consent to make a reasonable improvement in energy efficiency cannot be refused."

From 2018 renting of the very worst homes with an energy rating of E or F will be banned. 680,000 homes will be affected by this.

But, as Alan Whitehead, the Labour MP for Southampton, pointed out, the landlords register has been abolished by the Government, which could have helped them to monitor the sector.

All councils will play a role in delivery of the programme and the Local Government Association and DECC have an Memorandum of Agreement on the subject recently.

Huhne said that he wants to see the maximum possible range of measures included in the Bill.

The success of the Green Deal will depend upon how it works in the new market that will be created in energy savings. Huhne asserted that "The City is practically chomping at the bit to help finance the Green Deal", and cited the fact that Eaga has gone to the market already to secure bonds. "The securitisation market is opening up," he said.

The interest rate level will be key

But speaker after speaker said that success will really depend upon how low the interest rate offered will be. This figure is not in the current draft legislation, although Huhne mentioned 8-10% over 25 years.

Former Environment Secretary Michael Meacher said that the precise rate "is the fundamental issue - without a low interest rate, the Bill won't succeed as householders will be worse off than they are now.

"The WWF estimates that at 8-10% over 25 years then the likely effect of the Bill will be minimal," he said. ″Even if it is 6% only 1 in 14 households will take up the offer. The fuel poor certainly won't take it up. Why can't the energy suppliers meet the cost of helping the fuel poor in this case?"

Green MP Caroline Lucas took up this point, observing that not even Germany could obtain the level of refurbishment required, of over 4,000 houses a day. There they only manage 100,000 homes a year even with a Government-supported 2.6% interest rate.

"Besides," she added ″It is a whole house refit that is required to reach 80% reductions not a minimum level of refurbishment". At this rate, Government targets will be missed by a factor of 100.

Then there is the problem of competition. In the Warm Front scheme large companies hoovered up much of the work but smaller companies can often do it more cheaply. But Huhne promised the Green Deal will be open to small companies as well as large.

Huhne said that the legislation will create thousands of jobs. "The number of jobs will vary by area, but nationally is estimated at around 27k-100k by 2015 in insulation alone - there will also be unskilled jobs in the supply line." Costs will come because of the scale of the Green Deal.

More detail needed

The Shadow Secretary of State for Energy and Climate Change, Meg Hillier, called the Bill "a flaccid lettuce leaf, laden with missed opportunities", and promised in committee stage to seek to improve it.

She said that there have been no evidence sessions on the Bill, as is normal with the progression of a bill through parliament. "There are 27 million homes - how can all of them be tackled in the time available?"

"Why has the Government commitment to zero carbon homes ended?" she asked. ″Why won't the Green Investment Bank be up and running for two more years? This is a dog's breakfast of a Bill. We want it to succeed, but we need more detail. Climate change is too big to leave to the market."

Michael Meacher also criticised the Bill for using assumptions provided by energy companies of the level of energy supply in the future and then presuming measures to reduce it. "This is putting cart before the horse," he said, ″as it would make sense to assume that due to energy efficiency there will be a reduced level and then make measures to reduce that.

"Why is there no proper assessment of energy demand?" he demanded. "The power generators obviously want to sell more energy."

Iain Wright, the MP for Hartlepool, an area which hopes to benefit greatly from the green industrial revolution, lamented the pace at which the government expects to proceed.

He pointed out that the UK has already fallen from 3rd to 13th place in global ranking in this area and complained of rhetoric that is not backed up by certainty and commitment affecting investment.

Will ECO be capped?

The Energy Company Obligation (ECO), which will replace the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP) schemes at the end of 2012, will oblige energy companies to make sure that solid wall insulation is included in the Green Deal and will target the coldest homes.

But Huhne was unable to say whether it will be covered by the Treasury's Levy cap on DECC spending - if it is, it will be severely hobbled, said Alan Whitehead.

Whitehead also criticised the lack of assurances over who will accredit the contractors and doubted that there will be enough skilled people to do the job required.

Most shamefully, he said, the Green Deal fails the basic test of fairness - the poorest households will get the least help and left till last. "Who will pay the shortfall if the savings don't add up? What will happen to homeowners who buy a house that is saddled with debt?" Currently there are no answers to these questions, and the Government has abolished Consumer Focus, the body that tackles unfair practices by the energy companies.

Support for nuclear power

In other areas covered by the Bill, Martin Horwood (LibDem MP for Cheltenham) charged that Section 102 of the Bill gives away the Secretary of State's negotiating power over decommissioning costs for nuclear power stations, potentially leaving the door open for the taxpayer to pick up the bill.

“This means that the Government has effectively abandoned its commitment that the taxpayer should not support the nuclear industry", he observed, pointing out the 」61bn compensation that is being given by the Japanese government for the 800,000 people who have been evacuated as a result of the Fukushima disaster.

He said the Japanese are now reconsidering their energy policy with more emphasis on renewables and energy efficiency.

Huhne also said that an announcement on the fourth carbon budget, published by the Committee for Climate Change last December, will be made soon.

The Bill will now go to committee stage.

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