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Annual Energy Statement

Volume 536: debated on Wednesday 23 November 2011

It is important that when we discuss feed-in tariffs later today we understand the impact of our policies, and that is why we have brought forward the annual energy statement—so that the House can discuss the matter in its proper context during the debate later.

I am today publishing alongside the annual energy statement a consultation document on secondary legislation to provide for the green deal. It is important that we get this consultation under way as soon as possible because it will allow an expectant industry to begin planning for this vital energy saving policy.

The statement on our energy policy fulfils a commitment in the coalition agreement, and in describing the progress made and the policies under way, the statement also honours one of the coalition’s principles: our commitment to open and transparent government.

The consumer is at the heart of everything we do. Our decisions must ensure that the consumer is protected as far as possible from rising prices, and so we will secure our energy at the lowest cost. We will do so in the short term by promoting competition, in the medium term by insulating our homes and in the long term by steering us away from excessive reliance on fossil fuels and on to clean, green and secure energy.

The ultimate goals of the Department of Energy and Climate Change are to deliver clean energy for the future and to tackle dangerous climate change. Our vision is of a thriving and globally competitive low-carbon economy with cleaner energy, more efficient homes and lower bills. Over the past 12 months, we have taken significant steps to achieve just that. On both supply and demand, we have begun to deliver key coalition commitments, starting with energy efficiency.

Energy saving is now an equal priority with energy production. An economy that wastes energy cannot thrive in a high-demand, low-emissions world. Improving energy efficiency will save money and cut carbon, which is why we are creating a new energy efficiency deployment office within the Department. Our first task is to make our homes and businesses less leaky and wasteful. The Energy Act 2011, which received Royal Assent earlier this year, provides for the green deal—the pioneering programme under which businesses will install energy saving measures in our homes and recoup the costs over decades from the energy savings.

I am today launching the consultation on the secondary legislation that will allow green deals to begin next autumn, including the energy company obligation, which will support those who need the most help. Improving our buildings is vital but we must also change how we warm them in the first place. We are determined to help consumers heat their homes and businesses securely and affordably, and we will publish a heat strategy next year.

We are also making it easier for people to save energy. In March, we set out the strategy and timetable for introducing smart meters, which can help consumers to manage their energy use. Furthermore, we continue to push for ambitious EU vehicle emissions standards, and are providing £300 million in consumer incentives for ultra-low emissions vehicles and further support for research and development.

We are also working to secure Britain’s energy supplies. We need significant new investment in power plants and infrastructure to meet future demand. In July, we published the White Paper on electricity market reform, heralding the biggest change to the market since privatisation. We are also introducing a new system of long-term contracts, to remove uncertainty and attract investment, and a new mechanism for back-up electricity generation, to keep the lights on. We are setting new standards on emissions from power stations, to ensure that they are clean, and the Treasury is supporting low-carbon generation with a floor price for carbon, to help encourage low-carbon investment in the UK. Together, the reforms will deliver secure, affordable electricity from a diverse mix of sources, including renewables, new nuclear and fossil fuels, including carbon capture and storage.

Each of those energy sources will be important. They will work together in concert to deliver a reliable energy system, and over the past year we have introduced a range of policies to support them. We have published the first ever renewables road map, setting out the barriers to deployment and what must be done to deploy renewable energy at scale. We have also published a consultation on the right level of subsidy to support jobs, investment and growth. Professor Weightman’s report into nuclear safety after Fukushima reassures me that nuclear can be an important and safe part of the energy mix without public subsidy. In October, as part of our work to enable new nuclear build, I published the regulatory justifications for two reactor designs. Fossil fuels will remain important. That is why we are firmly committed to carbon capture and storage, with £1 billion still available for projects in the CCS programme, despite the disappointment of the Longannet project. Promising projects have been proposed, and we are developing a streamlined selection process, which we will set out shortly. Gas will continue to feature strongly in our energy mix, and our policies are designed to allow new gas plant to be built. I welcome Ofgem’s proposals to sharpen incentives for reliable gas supply.

We may need further measures to ensure that we are ready for low-probability, high-impact events. I am asking Ofgem to report to us by next spring on any such measures. We are improving the technical foundation of our energy security. Earlier this month, we laid the statutory security of supply report before Parliament, which sets out future supply and demand forecasts, and discusses risks and drivers. We are also making it easier for new nationally significant energy projects to be delivered. In July, this House approved the national policy statements for energy infrastructure, against which major energy projects will be assessed. Developers can now have greater certainty about how applications for consent will be considered and absolute certainty on when decisions will be made, with statutory time scales to ensure investor confidence.

Our actions will maintain the diversity and security of our energy supplies. We are working hard to ensure that they are delivered at the lowest possible cost. In a world of volatile fossil fuel prices—we all know about the events in the middle east and Libya—those objectives complement each other. We believe that the policies we have introduced will deliver the best value for consumers, as we move towards a cleaner energy future. However, as we embark on the transformation of our energy system, we must take people with us. That is why I am today publishing an assessment of prices and bills, and the impact of our policies.

Overall, we anticipate that rising world gas prices will push up bills for both gas and electricity, but our policies will moderate that rise. By 2020, we expect household bills to be 7%—or £94—lower than they would otherwise be without our policies. Moreover, bills will be lower during this Parliament. Britain’s homes will be cheaper to heat and to light than if we did nothing, in this Parliament and in the longer term. Those savings will result above all from our energy-saving policies and from market reform. In addition, we decided to fund the renewable heat incentive and carbon capture and storage commitments from general taxation, rather than from planned levies.

To sum up again, rising global fossil fuel prices and decades of under-investment will mean that prices for energy will rise in the UK, just as they will elsewhere. We cannot control global gas prices, but we can, as a Government, soften the blow. Prices and bills are forecast to rise, but we can ensure that they rise less than they would otherwise have done.

We want to leave a fairer energy legacy than those before us did. Between 2001 and 2009, fuel poverty doubled. The warm home discount and the affordable warmth part of the ECO, on which we are consulting, are targeted at the poorest and most vulnerable households. The warm home discount will support up to 2 million homes each year, helping more than 600,000 poorer pensioners, with £120 off their energy bills this winter. Other vulnerable people will also be eligible for a rebate. That discount scheme is worth two thirds more than the voluntary scheme that operated under the last Government. The Warm Front programme helped 130,000 households last year, providing advice and installing heating and insulation, with a further 90,000 set to benefit over the next two years. As it phases out, the affordable warmth part of the ECO subsidies will phase in to replace it.

We are also helping consumers more generally to take advantage of a competitive energy market. Consumers could save up to £200 by shopping around for the lowest online rate, but last year fewer than one in five households switched suppliers. We are making it easier and faster to switch, and we have launched a campaign to encourage consumers to check, switch and insulate to save.

We are also mindful of the impact on businesses. Earlier this year we published our proposals on the simplification of the CRC—carbon reduction commitment—energy efficiency scheme and for the new climate change agreements. We are committed to simplifying the regulatory burden on industry, while driving behaviour change to improve efficiency and reduce emissions.

Lower levels of energy efficiency savings mean that our policies will typically have a larger impact on energy bills for businesses. By 2020, policies are estimated to add 19% to the average energy bill of businesses that are medium-sized energy consumers. For large energy-intensive users, who are more exposed to fossil fuel price volatility, that figure is between 2% and 20%. It is important that these industries play their part in the transition to a low-carbon economy, but it is also important that they remain competitive. That is why we are working with the Department for Business, Innovation and Skills and the Treasury to announce measures before the end of the year to support those energy-intensive industries whose competitiveness is most at risk.

The energy sector is a vital part of our economy. Energy industries employ 173,000 people, contribute nearly 4% of our gross domestic product and provide more than half of our industrial investment. More than 51,000 companies in Britain provide low-carbon and environmental goods and services. Exports are now £11.3 billion a year—up 3.9%. Last year, nearly 4,500 new jobs were created in the sector, which grew by 4.3%.

We expect that our policies, like the renewable heat incentive, will strengthen supply chains across the country, bringing jobs and growth. The green deal alone will kick-start at least £14 billion of investment in the decade to 2022 and support at least 65,000 insulation and construction jobs by 2015. We want to ensure that young people today can play their part in the industries of tomorrow, so we are supporting green apprenticeships to build the skilled work force we need to deliver the green deal.

In conclusion, between now and 2030, our relationship with energy will change fundamentally. We have to build a new energy portfolio—one that is equal to our changing needs and our ambitious carbon targets. It has to be supported by a new consensus. Helping consumers to understand their energy costs, and how our policies affect them, is key. The decisions we take now will affect the way our energy is delivered for decades to come. I commend the statement to the House.

We are grateful to the Secretary of State, who has significantly exceeded his time. I gently remind him of the merits of the use of the blue pencil. So far as today is concerned, I must obviously make an allowance in respect of the response from the shadow Secretary of State.

I thank the Secretary of State for briefing the media about his statement today, before informing either the House or the Opposition. Is it any surprise that he is becoming increasingly rattled by growing opposition from his own Benches to the Government’s cuts in the solar power sector, and has chosen to bring his statement forward in order to squeeze time in our Opposition day debate this afternoon? Perhaps he is also trying to put a gloss on the Government’s energy policy before the energy statistics are published tomorrow—or perhaps advisers or lobbyists with “excellent contacts” with Ministers advised him to bring his statement forward. Whatever the reason, disrespect has been shown to the House today.

The Secretary of State said, “The consumer is at the heart of everything we do.” Will he start by telling us what the Government will actually do to deal with soaring energy prices? Energy bills are up by 20% this year, and standard tariffs rose by £175 between June and November alone, driving up inflation and squeezing household budgets. The Government, however, are so out of touch that their only answer is to tell people to shop around, and their only policy is to cut help to pensioners this winter. Can the Secretary of State explain why, with the end of the Warm Front scheme, for the first time since the 1970s a British Government are not offering grants to help to reduce fuel poverty?

The most effective and sustainable way of cutting bills is to reduce energy use, but the Government’s flagship energy efficiency programme, the green deal, has been delayed and is in chaos. We were expecting the green deal consultation back in September. More than two months later, it has finally appeared, but we are still not clear about what incentives households will be offered to take up the green deal, or what the Government will do to ensure that the 10p rate for a green deal package is low enough to secure the widest possible range of energy efficiency measures and the best deal for bill payers. Can the Secretary of State confirm that the Government’s forecast of the number of jobs to be created by the green deal has been slashed from 100,000 to just 65,000 by 2015?

Earlier this year, my right hon. Friend the Leader of the Opposition set out bold plans to break the dominance of the big six by requiring energy companies to sell power into a pool, thus allowing new suppliers to enter the market, increasing competition, and driving up choice for consumers. Will the Secretary of State explain why he is so afraid of standing up to vested interests in the energy industry, and delivering the reform that our energy market needs?

The green economy currently employs 800,000 people. It is estimated that the global market for low-carbon goods and services will be worth £4 trillion by 2015, with the potential to create 400,000 new jobs, but as a direct result of the uncertainty that the Government have created, the UK is falling behind. Last year, when we left office, it was ranked third in the world for investment in green growth. We are now ranked 13th, behind Brazil and India. That is bad for our economy, bad for our energy security, and bad for the prices that consumers pay, because it makes us ever more reliant on events overseas that are beyond our control.

Just yesterday, the Science and Technology Committee in the House of Lords accused the Government of complacency over the skills required for the nuclear industry. Given that power stations in the UK already import staff from the southern hemisphere to run them, given that many of the firms currently providing solar power are about to go to the wall, and given that British Gas has just announced that 850 jobs are to go, will the Secretary of State tell the House how he plans to halt the worrying decline in investment in the UK?

We look forward to the Government’s forthcoming announcements on how they propose to support energy-intensive industries, and we hope that their proposals will extend to both gas and electricity, but will the Secretary of State tell us exactly how much of the proceeds of CRC are going back into Treasury coffers? Under Labour's scheme, the money was returned to the hands of businesses to be invested in energy efficiency.

We shall have time to deal with the Government’s cuts in feed-in tariffs later this afternoon, but what sort of message does this whole debacle send out? How can the Government encourage investors to support the renewable heat incentive, the green deal or any other green policies in the future, when a growing sector, built on a flagship policy that had cross-party support, has been cut off at the knees with just six weeks’ notice? How can anyone have enough confidence to make the investment that we need when the Government are so short-sighted and so short-term, and chop and change their policies at every turn?

Today’s statement is just more evidence that the Government are out of touch, are cutting too far and too fast, and have no plans for jobs and growth.

The right hon. Lady asked what we were doing to help those who face substantial increases in energy bills. Over the last year there has been a 38% increase in world gas prices for delivery this winter, and that will inevitably be reflected in both gas and electricity bills. We have tried to protect consumers by taking the renewable heat incentive off the levy system and into general public expenditure, and by taking similar action in relation to carbon capture and storage. We have capped the feed-in tariff, and we are helping the consumer as much as we possibly can.

Far from our being afraid to take on the big six, Ofgem has clamped down on mis-selling, and we have ensured that the big six must inform people before raising tariffs. We have reduced the period within which consumers can switch suppliers to three weeks, and we are considering giving Ofgem powers to require companies to provide redress. All those steps constitute clear evidence of the determination of the Government and Ofgem to make this a highly competitive retail and wholesale market, which is the best guarantee for consumers that they will be given the best possible deal now and in the future.

The right hon. Lady mentioned the Warm Front scheme. She gave us no credit for the fact that the consultation documents on the green deal that were published today clearly show that we are replacing that scheme with the affordable warmth obligation referred to in the ECO consultation, or for the fact that the warm homes discount scheme is now statutory—it is not a voluntary scheme like that operated by the Labour Government—and will make the discounts available to those experiencing fuel poverty two thirds higher than those provided by the old voluntary scheme.

The right hon. Lady asked about incentives. The Chancellor of the Exchequer could not have made it clearer in his Budget speech that he would consider them. I believe that if the right hon. Lady waits for a matter of weeks, all will be made clear in regard to the Chancellor’s commitment to ensuring that the green deal is a great success. She should also bear in mind that we have already provided incentives, in addition to those that the Chancellor is considering. For example, all F and G-rated homes in the private rented sector will have to be upgraded by 2018 so that tenants can enjoy the benefits of energy saving.

Finally, the right hon. Lady asked what we were doing to encourage investment. The whole purpose of the electricity market reform which will be the centrepiece of the energy Bill that we will present in the second Session in May, and which we have already announced in the White Paper, is to provide the certainty that will lead to investment which, for years, the last Labour Government failed to deliver. A quarter of our power stations are going offline in the next 10 years: a quarter of our capacity. What did the last Labour Government do? Nothing—absolutely nothing. Yet the right hon. Lady, seemingly arriving from Mars, has had the temerity to come here today and pretend that we are not taking action, as if the last Labour Government had. I have to hand it to her: for sheer brass neck, she gets the prize.

Order. There is notable interest in the statement, but I remind the House that today is an Opposition day, and that there are two well-subscribed debates to follow. I want the first of them to begin before too long. Brevity is essential from Members—led, I feel sure, by Mr Peter Lilley.

My right hon. Friend made the breathtaking claim that he intended to keep energy prices as low as possible. How does he square that with the Stern review, on which his policy to combat climate change is based, and which makes it clear that that policy can work only if energy prices are raised to include the external cost of global heating, and if the cost of hydrocarbon-based energy is also raised to make it more expensive than other forms of sustainable energy? In short, if his policy is not hurting, it is not working.

I am grateful to the right hon. Gentleman for his question. If he is in any way unsatisfied with the explanations that we have given in the documents—explanations which are considerably more detailed than those provided by any previous Government—he should ask for a briefing, and we will ensure that he receives any additional answers that he may require.

The key point, however, is that a substantial part of what we need to do to tackle climate change involves measures included in our green deal legislation which pay for themselves and do not involve a cost, while those that do involve a cost—namely the raising of prices to enable us to move to a low-carbon economy when it comes to electricity generation—are offset by the reduction in energy volumes precisely because of our energy-saving measures.

I commend the document to the right hon. Gentleman. I am sure he will find is persuasive.

If the last Labour Government did nothing about energy policy, I cannot think why I was so busy all the time.

To raise the tone of this discussion, I welcome what the Secretary of State said about long-term contracts, and I would like to hear more. On carbon capture and storage, the Secretary of State knows that despite all the excitement about feed-in tariffs, renewables and nuclear, the world, including the United Kingdom, will mainly be using fossil fuels for the next few decades. What is happening in respect of CCS? There have been some disappointments in recent months. When does the Secretary of State think the first CCS plant in the UK will be operating and helping to clean up our planet?

I certainly did not want to imply that the right hon. Gentleman, who has considerable expertise in this area, was in any way slacking when he was an Energy Minister—although I think he might have had better support from his colleagues on certain occasions.

CCS is a key technology. The right hon. Gentleman is absolutely right to say that we are going to continue to be reliant on gas and other fossil fuels. If we move to unabated gas rather than coal, that in itself will save about half the carbon emissions. For the longer term however, CCS is essential if we are going to be able to use gas, especially if we find, as I hope we will, that we have considerable exploitable reserves of shale gas under Lancashire and elsewhere.

As I have said, Longannet was a disappointment—I made a statement to the House on that—but other projects are coming forward. Peterhead is nearer the reservoirs than Longannet, so the pipeline costs are likely to be lower, and less investment will be needed to upgrade the plant in line with the large combustion plant directive. All the parties who were involved in the Longannet negotiation are confident that we can deliver a commercial-scale CCS plant for within that £1 billion budget, and we intend to do so.

The Secretary of State highlighted the future role of gas in the economy, and producing our own gas is obviously the best option. To that end, will he stress to the European Union that its attempt to regulate the offshore oil and gas industry is in danger of creating regulatory confusion and more uncertainty, and that it would be far better to go down the directive route?

I am grateful to my hon. Friend for making that point. He is absolutely right. If we are going to introduce minimum standards for offshore oil and gas—the Commission has been kind enough to say they should be modelled on those for the UK continental shelf—that should be on the basis of a directive, so that we can use our own legal means to enforce the standards, rather than a regulation. A regulation that would apply directly in all the member states would be inappropriate because countries’ circumstances are inevitably different.

In spite of the warm words about the importance of tackling fuel poverty, next year will be the first year in three decades when there has not been a Treasury-funded scheme to do precisely that. Instead, we have a regressive scheme that will fund the energy company obligation through a levy on fuel bills. As the ECO will be split into two pots—the hard to treat and the fuel poor—will the Secretary of State ensure that the latter group does not end up in effect subsidising the former, by making sure he focuses on the fuel poor, the 1.9 million households in fuel poverty who happen to live in hard-to-treat homes?

The hon. Lady will know that I am passionately committed to helping the fuel poor. That is why we have increased the amount of warm home discount compared with the voluntary schemes. I disagree with her that the ECO subsidy is an ineffective way of reaching such people or that it is more regressive than other schemes. The fact that the previous scheme was Exchequer-funded was by the bye. What is important is achieving the key outcome of tackling the root causes of fuel poverty, and that we will do.

I understand that France has persuaded the European Commission to accept nuclear power as a renewable. Will the Secretary of State negotiate a similar deal for this country, and will he also make sure that the information on our energy bills is transparently clear, so we know how much of what we pay is subsidy for renewable energy?

I can do better than that, because the document published today contains precisely that information on the impacts on prices and bills. We want to be as transparent as possible, because it is important that people understand that although there will be price increases, we can, particularly as a result of our energy saving measures, also get volumes down, which is crucial to getting bills down. There is no point in our having unsubsidised energy and merely heating the atmosphere; we want to heat our homes, not merely push the heat out of leaky and draughty homes into the atmosphere.

I heard the Secretary of State’s comments about the potential of the Peterhead CCS project, and I would welcome investment there. However, is it not true that the Longannet project was much more important to the country because it is a coal-powered station, as opposed to the gas-powered station at Peterhead, and coal is the main export market for CCS? Is it not also the case that Shell and Scottish Power have got their sums right, and that their assessment of the investment required for the CCS power we need is much more realistic than the Government’s? We have thrown away the great potential of a large export market.

CCS is a catch-all for a substantial number of different types of technology designed to do the same thing: take the carbon out of the process of the combustion of fossil fuels. I disagree about gas versus coal, as I think gas, along with coal, will play a very important part in world supply for a long time, and there will be substantial CCS markets in both of them. It is important that the UK is in the lead in that.

The Government support the three recommendations of the billing stakeholder group, which I chaired at the Government’s behest, but there is strong evidence that one of those key recommendations is being ignored by the energy suppliers: the requirement that they contact each of their customers informing them on whether they are on the company’s cheapest standard direct-debit tariff. What are the Government going to do to put this right?

First, I want to pay tribute to the hon. Gentleman for his efforts in this area. We raised this point with the big six at the consumer energy summit, and my understanding is that they are in the process of notifying their customers. Perhaps not all those letters have gone out yet, but one of the commitments was that customers were going to be notified when there was a cheaper tariff they could move to online.

In what was a lengthy statement, the Secretary of State made no mention of either the long-standing problem of transmission charging, which affects green energy, or Ofgem’s Project TransmiT. What progress is being made, and will he finally take action to tackle this problem?

I have had continued discussions with Ofgem and, indeed, with the First Minister of Scotland. He and I think absolutely alike on the importance of moving to a regime that does not penalise energy sources for being further away from the market, precisely because renewable sources will inevitably be located where the renewables are. Also, nuclear is generally not welcome in the middle of our cities. For those reasons transmission charging should be amended. Ofgem is looking at that at present, but it is up to it to do so as an independent regulator.

The majority of consumers seek to shop around when their tariff rises, only then to run the danger that their new tariff will rise even further only days later. What measures are being considered to protect consumers on new tariffs for either six or 12 months?

The hon. Gentleman is right. Consumers have the option to choose a fixed rate of course, which will be for a specified period. At the time of the recent consumer energy summit, we made the key point that the big six, which supply 99% of our households, had announced their tariff changes and that some of them had committed to keeping them all the way through the winter. Right now is therefore a rather good time to compare prices and switch to the cheapest tariff.

I understand that it is important to get money into the Treasury, but is that more important than people’s lives? The Hills report found that thousands of people will die as a result of this Government’s policies. What is more important: money to the Exchequer or people’s lives?

I am afraid that the hon. Gentleman is not giving credit where it is due, although I cannot say that it is terribly surprising. I commissioned John Hills to produce that report precisely because I wanted a really good and authoritative review of how we can best tackle fuel poverty. I am determined that we shall do that. One conclusion of the interim report from Professor Hills was that there are 25,000 excess winter deaths and that perhaps 10% of them—a similar figure to those killed on the roads—are due to fuel poverty. We are determined to tackle that issue—[Interruption.] That is after 13 years of Labour government; let us please have a little cross-party consensus on trying to tackle the problem while recognising that it needs to be dealt with in the long run and that we have the means to tackle it at source as well as in the short-term through the warm home discount.

The Secretary of State will be aware that in the last year of the previous Government, less than 3% of our energy came from renewables and we were 25th out of 27 in the EU. By what extent does he expect to improve on that by the end of this Parliament?

I thank the hon. Gentleman for his question. We are determined to be the fastest-improving pupil in the class. At the moment, as the hon. Gentleman has pointed out, the inheritance from the previous Government puts us firmly in the dunces corner on renewables, but we are working our way out.

The right hon. Gentleman will be very much aware of the situation at Rio Tinto Alcan in my constituency, where 650 jobs are likely to be lost as a result of green taxes and high energy costs. What assurances can he give the work force at Rio Tinto Alcan that the package of measures that have been promised and promised again for energy intensive industries will be sufficient to keep the plant in operation and maintain the jobs, plus 3,000 jobs in the supply chain?

I understand the hon. Gentleman’s concern, which I have shared. I met the executives from Rio Tinto Alcan who deal with that plant and I put to them a simple question: if we were able to provide support for electricity generation through, for example, conversion to biomass, would they guarantee that they would keep the plant open? They did not give me an answer and one executive is quoted as saying that the 40-year-old plant was beyond Government subsidy. I do not think that, and I very much hope that we can work on finding a solution, but I can assure the hon. Gentleman that the energy intensive package is under serious and urgent consideration. It is on course to be announced by the end of the year, which is what we were committed to doing, and it is also a matter of regret to me that the announcement was made about the Rio Tinto Alcan plant before the managers had the opportunity to read what we were able to say, which suggests to me that they had previously made up their mind.

Of course, energy bill payers contribute a few quid towards the support of renewables, but the big six help themselves to £150 per annum per household. Does my right hon. Friend believe that that is a reasonable balance, and how can we achieve a reasonable balance?

The key in any market is to ensure that it is properly competitive. I am absolutely in favour of shareholders, particularly since they are usually our pension funds and our insurance companies, making the best possible return in a competitive market. That is why we are stressing the key competitiveness requirements of the wholesale market and the retail market. When we get that right, we will have the assurance that the rates of return in the marketplace for the big six and, I hope, for the new entrants to the market will be fair, precisely because they have been earned fair and square in a competitive market.

The Secretary of State referred to the green deal in his statement. What is he doing to ensure that VAT on products used in the green deal is set at the same level as for the energy it is designed to save—that is, at 5% and not 20%?

The hon. Gentleman raises an important point. There are substantial anomalies—and not just that one—in the VAT regime. It is not always possible, because of the commitments in the EU legislation, for member states to make unilateral changes to that regime but he certainly makes a sensible point and I am sure that the powers that be at the Treasury will listen carefully to it.

Does the Secretary of State understand the concerns of those who have “prepared their homes”, to use his words, and fitted solar panels about the pace of the reduction in feed-in tariffs, especially when they see the onshore wind industry being rewarded for inefficiency and destroying the UK countryside?

My hon. Friend raises an interesting point. We have cut the subsidies for the offshore and onshore wind industry, too, and we have done so because this Government are firmly committed to making sure that we deliver what we intend to deliver—that is, the shift to a low-carbon economy—at the lowest possible cost to British consumers. I am sure that we will have a greater opportunity to debate this subject later today, but I merely point out that the subsidies for solar feed-in tariffs now reflect a substantial fall in the costs of the underlying technology. That fall in costs, caused by the global changes in circumstances over the past year, means that those subsidies are providing a very similar real rate of return to that which was planned when the scheme was launched in April 2010.

Order. If it is possible to find a one sentence question and a relatively pithy reply—I do not wish to be too ambitious—that would be a considerable achievement. I look to one of the wise heads of the House and call Dr William McCrea.

During the winter months, the poorest members of our society will face soaring electricity bills and many in Northern Ireland have no alternative to heating oil. What action will the Secretary of State take to make home heating oil affordable to the most vulnerable in our society?

I am grateful to the hon. Gentleman for raising the issue of home heating oil because, as he knows, last winter that issue caused us a lot of concern. We referred the matter to the Office of Fair Trading and I was surprised with its conclusion but we must accept that it followed a full investigation. The longer-run solution will be to ensure that people are less reliant on the heat from heating oil through energy insulation and the green deal. We are determined that those who are off the gas grid will be able to take every opportunity to enjoy the benefits of the green deal, too.

Small solar panel companies about which I have written to the Secretary of State’s Department are having a particularly hard experience following the change in the tariff. They will lose jobs over it and they are asking whether the domestic 4 kW rate can be considered as a taper for a longer period so that they can recover from the shock of the quick cut in the tariff rate when they cannot deliver as quickly as the big boys.

I am grateful to my hon. Friend for that question. This is a consultation and a genuine one. We have made serious proposals and we are waiting for the responses. We will take those responses into account when we come to make decisions.

Energy companies often cite investment in generating power as the reason for the price rises. What assessment has the Secretary of State made of the amount of money made on the price rises compared with the companies’ investment in generating power?

The hon. Lady raises an interesting point. The need for new investment is clearly factored into the price projections in the documentation. It is not just about the rise in the overall world price in gas that is driving what is happening to our bills but the need to build a quarter of the capacity that is coming offline. That is factored into the calculations.

Has my right hon. Friend had the opportunity to look at how other countries, particularly Germany, support their high intensity manufacturing users of energy to keep bills down and jobs in the country?

My hon. Friend will know that my esteemed colleague, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), was there in September. We have done considerable work to look at the experience of other countries, which is a theme that we might come back to in the debate on the solar feed-in tariff. This Government do not believe that it is sensible to sit in a room and try to develop things from scratch and a priori if other countries have already done so and we can learn the lessons from them.

How can the policy change on the tariff possibly be a consultation when it is already set to change on 6 December? My constituent, Keith Bonner, wanted to install solar panels and he tells me that the £12,000 investment is no longer viable because of the change in policy. How does the change in policy fit with the requirements set out in the Secretary of State’s statement of increasing renewable energy, tackling climate change and reducing emissions?

The hon. Gentleman should know that there will not be a change in tariff before April. The key point is that the old tariff is applicable to any scheme that is installed either before or after 12 December, but any scheme that is installed after 12 December will have a lower tariff from April. We will have plenty of opportunity to debate this later today and I am sure he will want to contribute to that debate.

Will my right hon. Friend encourage Ofgem to deal with the tariff anomaly whereby household energy bills fall when households use more energy? Surely, that places a burden on single and less well-off households and flies in the face of our desire to encourage greater energy efficiency in households.

There are many anomalies that Ofgem is looking at in this area. A key part of that will involve looking at any unfairness in the system and making sure particularly that we simplify tariffs. There are far too many tariffs and that is confusing for consumers. If we can get a dramatic simplification, that will make the market work much more effectively. Currently, only 15% of consumers switch, whereas with car insurance about half do so through online sites. We need to get up to that figure and we will then find that the market works much more effectively.

Constituents have informed me not only that they are angry about the drop in the tariff and the potential loss of jobs in my area—these are people who have invested in the solar energy industry—but that the arbitrary deadline of 12 December means that there has been a rush for installation of solar energy in people’s homes, which is producing a sharp increase in the price of the components in panels. Does this not show that the Secretary of State has thought very little about the impact of this policy on the energy industry?

I disagree with the hon. Lady. When a policy is clearly going off the rails, it is important to grip it as quickly as possible. The problem with the industry was that it was massively exceeding its budget. If we had not acted, we would have been adding anything between £26 and £55 to the average household bill by the end of this Parliament, which would simply have been too much. We have had to take account of the cost to the consumer and I very much regret that the Opposition do not seem to remember that.

Twelve months ago today, after last year’s statement, I put forward a proposal about topping up card meters online, as I have them at home. I have gas and electricity from British Gas, and I am pleased to report to the House that that has happened with British Gas. Hon. Members can take it from me that electricity is far cheaper than gas, and I urge the Secretary of State to take that into consideration. Is not now the time to put more money into nuclear power and push that industry forward for jobs and in my constituency?

Nuclear is one of the three key pillars on the supply side, with the fourth pillar being energy saving. Those are the key parts of our policy. We have been meeting all our deadlines except those that arose immediately after the Fukushima disaster when I thought it was important to ask Dr Weightman to come up with a report that answered people’s concerns about making sure that the same thing could not happen here. With that one exception, we have been meeting our deadlines and we are on course for new nuclear without public subsidy.

The Secretary of State has referred to the carbon floor price and the carbon reduction commitment simplification proposals, both of which give rise to concerns in Northern Ireland that they will have a perverse impact given our market and geographical realities. Those impacts would be counter to the very policy goals that he has enunciated. Is he receptive to those concerns and will he and his colleagues be responsive?

The hon. Gentleman raises some interesting issues. We are in constant touch with the Northern Ireland Executive and others on these matters and of course we are receptive to concerns and to amending anything that would have a perverse effect of the type he describes.

The right hon. Member for Don Valley (Caroline Flint), who speaks for the Opposition, made the serious charge that the Minister had briefed journalists before coming to the House. In answering her question, it slipped his mind to answer that point. Can he tell us that that did not take place and confirm it by publishing and putting in the Library a copy of the media grid showing which journalists were spoken to before the statement?

I assure my hon. Friend that I did not speak to any journalist before making this statement. As far as I am concerned, it is an important principle that the House should be told first.

The Secretary of State has set out the future energy supply and demand forecasts within the security of supply report. Is he confident that if those forecasts prove to be inaccurate, we will be able to keep the lights on in this country?

Because of the disappointing economic situation, the margin of capacity has been rising. I am confident that we can do that, but we should not be complacent. We need to keep the matter under review and we are certainly doing that, but I am confident that we can keep the lights on.