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Energy Efficiency and Microgeneration Bill [HL]

Volume 689: debated on Friday 23 February 2007

My Lords, I beg to move that this Bill be now read a second time. It is traditional at this point for everybody to do a runner out of the Chamber. I do not have the voice to speak over them. I apologise to the Minister because it will be quite difficult to hear what I say. I apologise to Hansard, because it will be difficult to record what I say. However, I thank all those noble Lords who, on a Friday afternoon, are taking part in this debate.

I had prepared a long speech, but I shall cut it rather short in case my voice disappears entirely. I shall just run through the pertinent parts of this small Bill. The purpose of the Bill is to deal with the great threat of climate change. It is a practical attempt to solve some of the issues which are stopping people reducing the high level of carbon which is pumped into the atmosphere from domestic use.

It is interesting to note that a study carried out by Carbon Neutral North East questioned people about how they were affecting climate change themselves. A staggering proportion, more than 70 per cent, thought that their actions had nothing to do with climate change. They just got up in the morning, had a shower, came home again and turned on the heating. The fact that between 25 per cent and 28 per cent of our emissions, depending on which figures one reads, come from the home is a real concern. If we are to meet our Kyoto targets, and our further targets of reducing emissions by quite significant amounts in the coming decades, we have to look at changing the issue within the home. That is why the Bill picks out two areas where it is important that people are given help. The first is behaviour. A lot of carbon is wasted because we live in a society which wastes a great deal anyway, and it is done without thought. The second is cost.

It is amazing how much energy can be saved in the home through just the most basic of measures. This is why the Bill concentrates on what are seen as the uninteresting measures, loft insulation being the most important. When people talk to me about how they are going to save the planet, they often ask whether they should buy a wind turbine for their roof. One tells them, “Well, no, loft insulation will save a great deal more”. They often reply, “Well, that’s not very exciting”. It can be done, on a DIY basis, in an afternoon, and it would save an enormous amount of energy. It is important to note that 75 per cent of the energy used in the house is not from electricity consumption, where most people invest all their effort in saving energy, but from water and space heating, which people are loath to do anything about.

The second area which the Bill addresses is people’s apparent need to feel that they are saving money. There is a group of people who will do the work without worrying about the cost, but it is strange that, whenever one mentions microgeneration or any form of energy efficiency, people talk about the payback period. It is galling that, having installed a very fine new kitchen, I tried to raise the subject of the payback period with my wife, but it cut no ice whatever. However, if I were to think about installing a solar thermal panel on the roof, the cost and how long it would take to pay back would be very much an issue. It is a very fine kitchen. If my wife reads Hansard, which I hope she does not, I would say that it is worth every single penny.

This Bill is one of the first steps to ensure that many of these issues have real influence. I have been involved in discussions with many in the industry, especially B&Q. Many of the Bill’s measures concern the DIY industry. When I considered the Bill’s home efficiency measures I was surprised to note that we are talking only about a cost of £1,000. Considering that the average gas bill is £1,000 a year and rising, the payback on incurring that cost is not inconsiderable but has to be borne. However, I understand the vicious circle of fuel poverty for the poorest people. They cannot afford to insulate their homes, which means that they have to pay more for heating and have less money to spend on these measures. However, the Bill is aimed mostly at owner-occupiers. It is distressing that owner-occupiers will happily pay higher gas bills rather than go to the effort of insulating their roofs. This comes back to behaviour. We need regulation and inducements to make people change their attitude.

I shall consider each clause in detail. Clauses 1 and 2 deal with home information packs and seek to change people’s attitude to energy efficiency. Home information packs will include an energy performance certificate. The home information packs were badly gutted by their opponents. That is a great shame. Even some noble Lords on my Benches are against home information packs but I think that they are an excellent initiative on the Government’s part. I very much hope that they will be taken up by a vast number of people, as I am sure they will, as they quicken the buying process. Once people realise how logical they are, I believe that home information packs will be taken up and will be effective.

I have a question for the Minister. This is a Private Member’s Bill but I very much hope she can confirm that the late and rather aggressive response by the Council of Mortgage Lenders to the consultation will not cause delay in the implementation of the home information packs in June.

These two clauses take the energy performance certificate out of the small print, where many people will not read it, and put it in the main body of the pack. That is important as people will then take notice of it. Clause 2 requires a property’s energy rating to be included in all estate agents’ particulars. Therefore, this information will be prominent when you are trying to sell your house. It is well known that when you buy a house you negotiate the price on the basis of the state of the carpets and curtains. Given that a property’s energy rating will be so prominent, including all the recommendations on upgrading a house in that respect, it will become standard to start haggling over who should implement those measures.

Clause 3 concerns council tax. This is a real concern to those who are looking at the higher end of energy efficiency. Somebody might install a wind turbine at a cost of £25,000 or a solar panel on the roof to reduce their energy bills. This might have a disproportionate impact on the price of the house as it is then seen as more desirable. Those valuing the property might increase its value. There may be a disincentive to implement energy-saving measures if they result in an increase in the property’s council tax rating. The Government are considering this matter but I emphasise its significance as energy efficiency becomes more important.

Clause 4 is a review of the permitted development orders for wind turbines on agricultural land. The Renewable Energy Bill of two years ago, which I introduced to this House—the audience was not large, although I believe the noble Lord, Lord Whitty, was present—raised the issue of small generation on houses falling outside planning permission. Mr Cameron in another place will obviously make great use of this. He made much play of sticking one of these turbines on his house, although there seems to be a remarkable lack of its presence as of yet. That is, however, a side issue.

There is a slight dichotomy in that, under the Climate Change and Sustainable Energy Bill, which the Renewable Energy Bill became, you can put a small turbine generating up to 50 kilowatts on your house, but you cannot put it on to adjacent land; it has to be within the curtilage of the building. This is unfortunate, because if we are to look at real energy savings using wind turbines, we must put the turbines where the wind is. One of the big problems is that we could start putting a lot of wind turbines on to houses that generate no energy at all, or not enough to offset the carbon used in building the turbines in the first place, because of the wind being disturbed as it comes through housing estates. However, there is a real possibility that many people at the end of lines in rural areas, who use disproportionate amounts of energy to get energy to them, could generate the energy they need by putting a small turbine next to their house.

I have a particular interest in this in that I tried to make a small tourist attraction of mine in Northumberland carbon neutral, but the Northumberland National Park objected to a 6.2 kilowatt turbine. That is not a large turbine, but I had to fight for two years and spend thousands of pounds to get that through. If we believe that climate change is real and that we must do something to offset our energy costs, it will be impossible to make any movement at all if such difficulties continue. Obviously if wind turbines are made a permitted development, there are vast areas that we could consider using for small-scale generation. We could, for example, put turbines in clumps on farmers’ fields, which has a great deal of support from the National Farmers’ Union and could be considered as a way of offsetting renewable development costs, as per the Merton rule, in agricultural areas where a great deal more energy would be generated that could feed into the housing estates. This would make life a great deal easier, and has the support of the Town and Country Planning Association. Planners are in an impossible position between those who will object to any turbine being built and those who see putting one up almost as an economic necessity to reduce their energy costs. Clear and present guidance on that could be taken forward, and I very much hope that I can meet the Minister’s officials and discuss this.

Clause 5 was an attempt to explore the possibility of using green mortgages to offset the cost of installing energy efficiency measures. The idea behind it was that there would be a saving to the householder in implementing the energy efficiency measures. This would reduce their utility bills and thus make it easier to pay the interest on the mortgage. I know that the Minister will not be able to give a great deal of succour to the idea of taking this forward on the basis that a mortgage is, in legal parlance, a death deed, and that to make any changes to mortgages would mean rewriting most of the financial services provisions on mortgages. Although this is an important measure, I do not believe that the Government would see it as that important.

Great progress has been made since First Reading and discussions with the Minister’s department. The alacrity with which her department and her officials have taken on board some of the concepts of the Bill—perhaps they were thinking about them anyway—was shown in the press release of 25 January, which says that Clauses 1 and 2 will be put into regulations. May I say how grateful I am to the Government for moving forward on this? This is a very progressive step. Although it is not as exciting as, say, a very large wind turbine farm, which everyone can become excited about, it will have a massive effect on energy efficiency in the home, because it will hit a group of people who are not covered by other schemes. You are hitting the homeowners, who will feel that it is in their financial interest to make their homes far more energy efficient. There are some technical difficulties through the consultation process of enacting some of the measures in Clauses 1 and 2 for the June deadline, but when they are brought in through regulation there will be a marked increase in the take-up. I know from talking to the industry and to the DIY sector that they believe that it will be an interesting way of highlighting their products.

One of the things that I would like to talk about with the Government is the difficulties that they might face in making sure that products that come in under the EPC rating are of high enough quality, because there will be a problem of first getting your review under the EPC and then upgrading your house before you sell it, which is an issue that needs further work and discussion. It would be interesting to consider energy efficiency products having their own colour coding. In the same way that green products are seen as green, I suggest that products that would come under the EPC banner could be given a blue coding. Green products are always seen as having a price premium, whereas energy efficiency products will save money in the long term.

I apologise for being difficult to understand on this Friday afternoon. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Redesdale.)

My Lords, I support the Bill. I will speak relatively briefly because, despite his vocal incapacity, the noble Lord, Lord Redesdale, has managed to convince me that the Bill is well worth being taken forward by the House. It is one of a series of Private Members’ Bills—perhaps a good indication of the importance of the mechanism—that have, either by being directly adopted by Parliament or by influencing government behaviour, made a perhaps small but significant, positive step towards tackling such issues as fuel poverty, energy efficiency and climate change. This Bill is very much in that tradition, and the noble Lord has played a major part in those earlier Bills. I hope that the Government will take most of the points on board in so far as they have not already done so.

I will declare several interests, just in case they come up. I am a member of the Environment Agency and the London Climate Change Agency, and president of the Combined Heat and Power Association. I also chair the National Consumer Council. As the noble Lord said, if you are looking for sustainable consumer choice, cost at the margins makes a lot of difference. In this area, and in sustainable choices in general, anything that can reduce the cost will guide consumers to make more sensible sustainable choices. This Bill deals mainly with facilitating action and changing the behaviour of householders, farms and small businesses, particularly in improving the energy efficiency of buildings. It also helps to ensure that the property market, both its regulatory framework and its taxation, encourages energy efficiency improvements rather than, as occasionally happens at present, discouraging them.

The first two clauses are tied up with the argument about home improvement packs. I think I am correct in saying that, seven years ago, I was the first Minister to introduce a Bill—which failed with the calling of the 2001 election—to put home improvement packs in place. It has taken seven years to get there, and there has been considerable turbulence for Ministers in trying to pursue this. I put on record my commendation of the Housing Minister, Yvette Cooper. Whatever else she has encountered in this area, she has maintained a commitment to energy efficiency, which looks as though it will survive and will be a major contribution.

The Minister also deserves commendation on social housing, where, as the noble Baroness knows, I do not always agree with government policy. Any money that you might squeeze out of the Chancellor in the next spending round—for new-build social housing and replacement of the decent homes initiative—will help to improve the energy efficiency of our building stock. It is important we say that because in the past there has been a trade-off between the ability of units to be produced and the standard of energy efficiency. That is a false economy on behalf of government and future household occupiers.

Most property is not new; in some cases it has existed for several hundred years. We have the least energy-efficient property stock in northern Europe. The property market is almost entirely about exchanges on existing property. As the noble Lord, Lord Redesdale, said, over 25 per cent of carbon emissions emanate from the building stock. It is important that we require in the buying and selling process that greater attention is paid to energy efficiency provisions. Under the HIP provisions we will set different prices for equivalent buildings on the grounds of relative energy efficiency. It may be relatively marginal to start with, but it will become a significant part of how people negotiate the price of a building, in terms of premium, on the one hand, and discount, on the other—and in last-minute deals on a house.

I regret that, when I took part recently in debates on the Consumers, Estate Agents and Redress Bill, I failed to notice the need for a requirement, in quasi-regulation under that Bill, that estate agents ensure that all their advertising meets the kind of provisions that the noble Lord has put into this Bill. That may have been another way in, but it is here in this Bill and we should endorse it.

As the noble Lord, Lord Redesdale, indicated, since the Bill was first presented, the Government have moved some way towards stating that they will regulate in the context of HIP roughly what is contained in the first two clauses. I would very much welcome confirmation of that from the Minister. I hope that that would ensure that the provisions of Clause 2 would be dealt with in legislation passing through another place, or in other ways. If we were to remove our attention from those two clauses, and if the Government were unable to use other provisions, we would be missing an opportunity.

Another issue is how we fund the market. Mortgage providers fund the bulk of the property market, both domestic and commercial. It is important that, given the many options available to mortgage seekers of all kinds and the creativity of the financial sector in this area, which has been positively remarked upon, we should consider requiring that energy efficiency improvement be offered on mortgage-like terms, with long pay-back periods and mortgage-related interest rates. Whether they should be called “green mortgages”, with all the complications to which the noble Lord has referred, is immaterial; but there is scope for placing a mandatory requirement on mortgage providers to offer some kind of option. After all, the contribution of the financial sector to sustainable objectives has not been remarkable. It is an area where mortgage providers and banks could make a significant contribution.

The other aspect of any market is taxation, and the provisions on council tax are important here. There are some very good but localised examples of individual councils making positive provision through a council tax discount against improvements for energy efficiency or fuel poverty elimination. I would prefer to see a big push on that front, but it is also true that a number of provisions, which both domestic and commercial operations have adopted, have led to an enhanced council tax band or enhanced business rates. That is perverse; the Bill has a fairly minimalist objective: to avoid the discouragement of desirable energy efficiency measures by the council tax system. I hope that the Government, including the DCLG in its arguments with the Treasury in this area—it is responsible for local taxation—will ensure that we avoid this perverse effect.

In addition to householders and small businesses, the Bill would benefit farmers. Most people tend to think that farmers’ contributions on energy supply are largely through growing biofuels, of which I am an important advocate. They can also make a major contribution by having small-scale generation on their land. I am very much in favour of the commitment in the recent energy White Paper to use decentralised energy; I refer to their and their near neighbours’ use on-farm and to selling that energy back to the grid. We are talking not about huge turbines here, which involve landscape objections, but small-scale wind turbines, solar power, CHP on-site and so on, all of which could make a significant contribution. That provision is an important part of this Bill; it could save farmers money and give them some much needed income.

All aspects of this Bill should be acceptable to the Government; they are much in line with aspects of the energy White Paper and the Government’s desire to encourage more sustainable behaviour among consumers. Taken with the measures that the Government have already embarked on, they could make a major contribution to the efforts of householders and owners and occupiers of buildings to tackle climate change. I therefore commend the noble Lord, Lord Redesdale, on bringing this Bill forward and I hope that the House can accept it.

My Lords, I, too, should declare an interest at the outset as a past president of Energy Action Scotland. I continue to support that highly respected and very effective organisation. I also congratulate the noble Lord, Lord Redesdale, on promoting this Bill, which I support. I very much hope that it will have a smooth passage through the legislative process. Although the noble Lord did not specifically refer to this in his opening speech, the Bill in my view builds on the Climate Change and Sustainable Energy Act 2006. That excellent piece of legislation was introduced by Mark Lazarowicz in another place in 2005. It enjoyed enthusiastic cross-party support during its consideration, which was widely welcomed as a sign that the Government were serious about the need to ensure that microgeneration makes a contribution to their energy and climate change targets.

Microgeneration or micro-power could be described as involving small-scale renewable low-carbon-source energy technologies. It can play an important role in this country’s contribution to combating the effects of climate change. It will increasingly have the additional benefit of reducing the transmission capacity requirement of the national grid and may in the longer term obviate the need for investment in large new power stations.

One factor in increasing the proportion of this country’s energy that is generated by renewable sources is convincing people that they, as individuals, can be supporting actors in what is not just a big picture but the all-time blockbuster. Those who attempt to downplay climate change or even, in extreme cases, to deny its very existence—there still are some—are the modern-day flat-earthers. Thankfully, their voices are becoming ever fainter as the evidence against them mounts. The question is not, “Do we need to act?” but “How quickly do we need to act?”. Public opinion in the UK does not ask what the problem is; it asks what we can do to reduce and, ultimately, overcome it. Microgeneration is a realistic means of responding to that question, although much more prosaic actions can be undertaken.

Many noble Lords will have seen this week’s full-page newspaper advertisements by the Energy Saving Trust as part of its “Save your 20 per cent” campaign, in which it highlighted doing things such as turning off the TV standby and using energy-saving light bulbs and loft insulation. As the noble Lord, Lord Redesdale, rightly said, any family can implement such actions immediately—with, I suppose, the exception in the last case of most flat dwellers.

Thereafter, many people genuinely want to do more to directly lower their own carbon output. That is why the encouragement offered by schemes such as the low carbon buildings programme and its Scottish equivalent—the community and household renewables initiative—are so important. Both provide grants for householders and community projects, as well as builders and developers, to support the installation of large microgeneration technologies.

These schemes are increasingly successful, but significant barriers remain to be overcome if the uptake of microgeneration and energy efficiency is to be increased. I think that it is fair to say that, historically, the major constraint has concerned a lack of information about the products available, allied to concerns about their quality and reliability and the length of the payback involved. I should be interested to hear the comments of the noble Lord, Lord Redesdale, on payback. I put the question to him, in particular, because he gave the example of his kitchen, but he did not say whether he was to pay back his wife or whether his wife was to pay back him and, if so, whether it was to be a financial transaction. Perhaps he will tell us when he addresses the House again.

Payback is an issue in relation to these schemes, but cost cannot be put to one side, not least due to the fact that new products with an initially low demand are often expensive. To that end, the announcement by the Chancellor of the Exchequer in the 2006 Pre-Budget Report that the sale of surplus electricity from installations designed for personal use would not be subject to income tax is much to be welcomed. However, for that to become fully effective, I believe that a third barrier—the lack of suitable meters to record and evaluate micro-producers who may want to export excess power to the grid—must be addressed.

A further disincentive has been the requirement for planning permission for some forms of microgeneration. The 2006 Act charged the Government with responsibility for reviewing the current regime concerning planning permission requirements for micro-technologies. I hope that that will be brought to a swift conclusion, followed by the implementation of effective changes. That said, local authorities that have a policy of encouraging such developments can already act in a manner that will facilitate their introduction.

As an example, I draw the House’s attention to the City of Edinburgh Council, which wants to encourage its citizens to install solar water heaters and is in the process of making such applications exempt from the permitted development regulations. At present, applying for planning permission can add £300 to £400 to the cost and can mean a delay of several months, neither of which is likely to act as an incentive to householders. I am sure that other local authorities will be seeking their own way to remove such obstacles to the development of microgeneration, but the sooner the Government produce conclusions to their own review, the better.

Clause 4 of the Bill refers to the need to facilitate the development of microgeneration on agricultural land, and I can well appreciate the noble Lord’s reason for highlighting this need, particularly as he outlined his own recent experiences. That was not specified in the 2006 Act, and there must be a great deal of scope for utilising microgeneration technologies in the agricultural context in ways that would not just contribute to the overall need to reduce carbon emissions but also provide cheaper and more efficient forms of heat and power in rural areas.

There is a tendency by those of us who live in urban areas to assume that anyone who wants a gas supply at their home can have it. But, of course, that is not the case. In fact, it is probably not widely known that around 30 per cent of homes in Scotland are off the mains gas grid and are never likely to be connected to it. I am sure that some rural areas in England will not have access to gas supply either, and I imagine that that will particularly be the case in respect of agricultural land. Quite apart from issues relating to carbon emissions, research undertaken by the Fuel Poverty Advisory Group shows that the most effective measure for removing a household from fuel poverty is to fit a gas central heating system. Where that is impossible, other measures become increasingly important, which is an additional reason why this clause should be welcomed.

I am particularly supportive of the clauses that seek to build into legislation measures that will increase awareness of what is termed the “energy rating” of a property. Not only will a prospective purchaser of a home who is conscious of energy efficiency have the ability to make a fully informed assessment of the overall quality of the property but the fact that estate agents will be required to bring this important issue to the general attention of all prospective purchasers will be of considerable value. Irrespective of whether they had hitherto placed energy efficiency within their criteria when deciding on the suitability or otherwise of a property for purchase, I believe that the fact that this information is up front in the particulars—as the noble Lord, Lord Redesdale, described it, moving from the small print to the large print—will reinforce its importance.

Earlier this week, the Scottish Parliament somewhat controversially voted to introduce a single seller property survey. This means that the seller of a property will be responsible for producing the information necessary fully to inform potential buyers—a move opposed by the Law Society of Scotland. The kind of information outlined in Clause 1 of this Bill could usefully be included in that Scottish single seller survey. I hope that the passage of this Bill will encourage that to happen, because I firmly believe that such information should increasingly be regarded as essential when a property is being purchased.

I also welcome the fact that notices to be displayed by estate agents will be required to make explicit reference to the value of energy efficiency and microgeneration. Fuel poverty is a major issue and, apart from through gas central heating, it can be reduced by the relatively inexpensive use of basic energy efficient practices, such as loft and cavity wall insulation, as has been said. It would be a mistake to assume that fuel poverty affects only the poorest families. The accepted definition of fuel poverty is a household where more than 10 per cent of its income is spent on heating. Home owners often fall within that bracket, particularly at times of high fuel prices, such as we have been subjected to over the past two years. It is self-evident that any measures that people have not previously used to minimise their energy bills have to be of considerable value, and the more that such measures are highlighted, such as those suggested in this Bill, the better.

Other clauses in the Bill also serve to emphasise the need for the growing importance of microgeneration technologies to be more widely recognised. One of the main considerations of fitting, say, a small domestic wind turbine is that the price could be in the region of £1,500, not including the cost of the planning application. With even the upper end of estimates for the consequent annual saving on fuel bills unlikely to exceed 10 per cent of that cost, that suggests a considerable payback time—very probably longer than the individual intends to retain ownership of the property. Thus any measure that ensures that an increase in the value of the property consequent on the installation of a microgeneration system does not have the knock-on effect of pushing the council tax payment into the next band is desirable. The noble Lord, Lord Whitty, called it the perverse effect. I very much agree with that and I hope that the Government will find a means of avoiding it so that it does not act as a disincentive.

Equally, when a householder wants to introduce some form of micro-power as supplementary energy generation, knowing that there is a ready source of funding to facilitate it will be a considerable comfort. The noble Lord, Lord Redesdale, accorded that a plan for green mortgages—I am attracted to that terminology—but I should have thought it likely that, as the value of the property should increase, most banks or building societies would be willing to provide lending. Clause 5 of the Bill guarantees that, which could play an important part in convincing individuals to proceed with some form of microgeneration.

In conclusion, I believe that the Bill deserves to meet with widespread support, and I very much hope that it will. It will enhance the major advances contained in the Climate Change and Sustainable Energy Act and encourage more people to make their own contribution to reducing carbon emissions, tackling fuel poverty and ultimately reducing demands on the national grid. I look forward to the Minister signifying government support for the thrust of this Bill. Once again, I congratulate the noble Lord, Lord Redesdale, on having the foresight to bring it forward.

My Lords, I, too, thank and congratulate my noble friend Lord Redesdale on introducing the Bill. It is funny how in these debates you often find out things about Members from opposite sides. On this occasion, I found out something about noble friends. It seems that everybody on the Liberal Democrat Benches is having their kitchens redone. I do not have a question about the pay-back period in this area. My concern is that, as we speak, my ceiling is being taken out, and I wonder whether I will be able to eat at all this weekend. Perhaps I will have to come back quickly to the Members’ Dining Room on Monday, but we will see about that.

The key thing about this Bill is that it brings the issues down to individuals and individual households. I have recently been to a number of small-scale showings of Al Gore’s “An Inconvenient Truth”. The reaction at the end of that presentation is one of “What we can do as individuals?”. Too often with global warming and climate change, we are intimidated by the problem being so large, long-term and seemingly intractable that we wonder what we can do about it as individuals. Then we remember that the United Kingdom is only responsible for some 2 per cent of carbon emissions, the EU 13 per cent and so on. The problem is elsewhere, but there is a great wish by individuals who are increasingly coming to recognise the problem, as noble Lords have said, to take some action themselves. The Bill shows how that can start to happen on an individual basis.

From the Government’s point of view, there are only a limited number of ways in which this can be done, and the Bill reflects some of them. One, as we know, is green taxation, carbon emissions trading and the pricing side of things. Again, the Bill brings pricing or charging down to the household level, in that it makes a statement that by improving our energy efficiency or producing energy ourselves, we are not penalised by increasing council taxation on our own properties. It has that ticked.

We have a positive in that the Bill does not add regulation, but removes some on planning issues, particularly in agriculture; again, we have a tick. Information is important in keeping people onside and maintaining their enthusiasm for and recognition of these issues. That conveniently ties in with other areas of government legislation, such as that on estate agents and household information packs, a critical area tying in with the good will and wishes of those concerned about these issues to do this in a practical way.

There is another important area. I have recently moved to a hill by the coast in Cornwall. There is no better place, other than many in Scotland, to maximise wind energy. We have looked at wind generation with a 6.5 kilowatt generator on our property, which is technically feasible. When we look at the capital cost, however—something like £21,000—it is a lot of money for any household. Although we talk about payback, which is important, there are a number of other important items of household expenditure. Even in an area with a high level of wind energy, our payback is estimated to be something like 12 years.

As the noble Lord, Lord Whitty, has pointed out, financial service businesses and lenders have not been proactive in terms of householders and consumers being able to get the cash flow for micro-energy. It would clearly be best if the savings made were equal to future loan repayments, but the financial markets do not quite work in that way. There is a clause in the Bill of the noble Lord, Lord Redesdale, reflecting affordability and cash flow.

The Government have important targets on cutting carbon emissions. Unlocking the potential of individuals, households and families to help those targets is very important within a national and global context. On behalf of the Liberal Democrat Benches, I therefore welcome the Bill, as have other noble Lords who have already spoken. I recommend that the Government take the Bill though both Houses; it is complementary to the Climate Change Bill we expect later in this Session.

My Lords, I, too, congratulate the noble Lord, Lord Redesdale, on enabling this interesting debate on appropriate carrot-and-stick incentives—more carrot than stick—to improve energy efficiency and encourage the use of microgeneration. He can be assured that the message in his speech opening this Second Reading debate was robustly delivered despite his croaky throat.

I should tell the House that, some time ago, I investigated the possibility of emulating a number of my Dutch friends by looking at the economics of installing a wind generator in my drafty part of the Fens, much like the noble Lord, Lord Teverson. At that time, it was not a feasible proposition, and I regret to say that I doubt it would be one now, but to the extent that I have an interest, I should declare it. I am also one of the people referred to by the noble Lord, Lord Watson, who have no access to mains gas, despite the fact that the Bacton gas line goes through our farm. Not surprisingly, I have maintained my interest in the subject.

A consensus is building fast that manmade climate change is one of the greatest environmental challenges faced today. Its consequences are not just environmental; they are also economic. The noble Lord, Lord Watson, rightly drew attention to that. Advocates of ecological modernisation are right to highlight that environmental policies can help boost the economy, create new jobs and stimulate revenue streams. Microrenewables are an example of that. They are part of a high-tech, value-added sector in which we as a nation could excel. They are right up our street, one might say.

Indeed, it is easy to argue that the Government should be leading by example in this area. I was pleased that the microgeneration strategy that the DTI published last year suggested that:

“Government departments are in a good position to lead the way through demonstration of these technologies”.

However, I have been disappointed that the only promised action is for the DTI actively to investigate the possibilities for microgeneration on its estate. With the Government publicly committed to a number of building programmes, such as community hospitals and prisons, can the Minister inform the House about what progress has been made in the past 11 months to deliver that commitment? Do the rules of the private finance initiative include provision for microgeneration in association with projects? How seriously are agencies, public bodies and government departments taking centre stage in developing exemplars? I hope that the Minister will be able to commit to a review of progress in this area that can be reported to the House.

Very little that is put forward in the Bill is new or dramatically original, but I shall take the opportunity afforded by this debate to press the Minister on some of the issues. The noble Lord, Lord Redesdale, is rightly pleased with the outcome of his proposals in Clauses 1 and 2, which consider the energy rating of property. I am sure the Minister will highlight the EU directive on energy performance, which will require us to produce an energy performance certificate whenever a building is constructed, sold or rented out. From June, it will be an essential part of home information packs in which sellers prepare key information before they put a property on the market. I shall not reiterate our view of home information packs because the House knows it well. The noble Lord, Lord Whitty, spoke eloquently in their favour. How many inspectors will be fully trained to deal with property sales after 1 June, and how many will be needed to carry out the anticipated workload? Is there a contingency plan in case there are not enough trained inspectors? Have Her Majesty’s Government made an assessment of what failure—for a failure I expect it to be, unless the Minister can surprise the House—might do to property sales? These are the questions that we should be asking, not whether an estate agent should be compelled to make generic statements on his literature.

As the noble Lord, Lord Redesdale, said, more than 25 per cent of UK carbon emissions come from domestic housing, and the Government are committed to a 60 per cent cut in emissions by 2050. Encouraging domestic home owners to save energy is a logical step. Yet it has been put to me by outside organisations that the current approach to renewables, especially microgeneration, while well meaning, is a combination of underfunding and mismanagement as well as a lack of appreciation of the impact these projects can have on the real world.

Let us consider what the Government have done. The low carbon buildings programme—LCBP—is the Government’s principal mechanism to deliver their policy to expand the use of microrenewables. It issues grants for householders seeking to install microrenewables. However, the DTI’s cap on monthly allocations has meant that the total grant for this month—£0.5 million—was allocated within just 12 hours of it becoming available. That does not seem inductive of encouraging homeowners to “go green”. Indeed, the REA and trade associations have argued that it is killing demand. What assessment have Her Majesty’s Government made of whether this system is indeed adequate or efficient? Have they considered calls for the removal of the cap, which some suggest presents uncertainty to the industry and its customers?

If you are one of the successful few who are given a grant under the LCPB, how successful is it? There was an article in the Times of 17 February which claimed that urban turbines were a,

“load of huff for very little puff”.

Having spent £13,000 on installing a wind turbine in his urban home, a Mr Large was disappointed that the return on his investment amounted to only 9p a week. The noble Lords on the Liberal Democratic Benches might expect a better return than that from their kitchen investment.

Part of the problem was that the turbine puts power directly into the national grid, but the requirements of the grid mean that power can only start being transferred once the blades have been turning fast enough for several minutes non-stop. That highlights that some of the attraction of microrenewables is that, as a consumer/producer has less need to buy electricity, they can make money by selling any excess electricity back to the national grid. However, that is being made far too difficult by an inadequate infrastructure and burdensome regulations. What assessment have Her Majesty’s Government made of the current operation of the national grid, and how well is it configured for two-way energy flows from many small households?

Has the Minister given consideration to the fixed-feed tariffs that are the primary support instrument for renewable energy throughout Europe? Under that system, a fixed price is paid for the renewable energy, usually with different price levels set for different technologies. These prices are linked to market penetration and development of any market. For example, elsewhere PV’s current fixed-feed tariff rates range from €15 to €62 per kWh. That seems to have successfully encouraged a range of renewables to come through under the renewables obligation, not just onshore wind as in our case.

Clause 3 raises the issue of value in relation to domestic households. It is interesting that if you get an organisation to install your system, you pay a lower rate of VAT than if you bought in all the parts and installed it yourself. That is certainly inconsistent, and I would be interested to hear the thoughts of the Minister on that situation. While the noble Lord, Lord Redesdale, has discussed the impact of home improvement in terms of council tax valuation, I would like to touch on the effect that investing in renewable energy can have on business rates.

What assessment have the Government made of the potential impact on small and medium-sized businesses, whose rates may increase as a direct consequence of green investment? I understand that there may be a disparity between combined heat and power, which is partially exempt from business rates, and zero-carbon renewables, which are not. I hope that the Minister can clarify that point in her reply.

I am conscious of the time. We have been a happy if small band this afternoon, but it is clear to all of us that there is much to do both on individual and business levels. We need to look carefully at the working and implementation of the incentives currently available.

The noble Lord, Lord Redesdale, has done the subject a great service by bringing his Bill to the House. I hope that I do not disappoint him when I say that we do not agree with all of his proposals, but we support the opportunity for debate and I hope that the Minister will use it to respond to the issues and questions raised.

My Lords, we have had an interesting and enjoyable debate. I am sure that the noble Lord, Lord Redesdale, will have some of the answers to many of the questions raised. I shall do my best to answer them from the Government's point of view.

It has been a heroic debate, not least because the noble Lord is struggling with a sore throat. I hope that he is feeling better because of the warmth of support that he has received from around the House. We have also had a diversion into domestic arrangements. I can join the debate on new kitchens: I have just finished one. I have no idea when I can look forward to payback; in fact, I have almost given up already on any return.

This is a very serious debate. I commend the noble Lord for his ingenuity and imagination, as well as his commitment to raising, and enabling us to address, such important issues. Noble Lords have already anticipated much of my reply. Although we are extremely sympathetic to the intention of the Bill, as many noble Lords have pointed out, I am going to say that the Government are doing much of what is in it; indeed, we are going further. I am especially glad to have the company of my noble friend Lord Whitty, with his long history not least in the development of the home improvement packs. He is now taking his expertise into other areas.

We are well aware that the improvement of energy efficiency in housing stock is a fundamental battle against climate change. I understand that 27 per cent of carbon emissions come from homes, which account for a significant amount of the roughly half—47 per cent—of carbon emissions overall that come from buildings in general. We are right to want to draw those figures to the attention of every householder. We have had the beginnings of a very interesting debate about the nature of the public response at present and the aspiration that individuals are showing to take the matter into their own hands and do what they can, even in sometimes unglamorous ways, to address the problem. We are as one in recognising that microgeneration equipment has a crucial role to play in enabling us to do that and to reduce carbon emissions.

I shall describe how much of the Bill is covered by anticipated changes in regulation and so on and by our work across the whole field of microgeneration in response to climate change. I am sorry to say that we do not believe that primary legislation is required at present.

I shall also say a few words, although I am very grateful for the noble Lord’s restraint, about home information packs. I quite appreciate the division that exists between us in the House. We believe that home information packs will make a significant contribution to making the buying and selling of homes more rational, transparent, better informed and more effective for consumers, but this is an opportunity to bring noble Lords up to date before I address the Bill. I am very grateful for noble Lords’ support for home improvement packs, particularly for energy performance certificates, which are a crucial part.

Last month, we published a home information packs update that outlined our plans for finalising the introduction. I assure the noble Lord, Lord Redesdale, that, despite continuing criticism—much of which is from people who have never been sympathetic to what we are trying to do—we will definitely introduce home information packs on 1 June and will lay regulations next month. That is part of the process. Last month’s update reflects our commitment to react to information coming in from the area trials and provides information on areas of policy that have been adjusted in response to such information.

In particular, we propose changing the policy on the timing of the provision of searches and leasehold documents because they have proved to be sticking points in some areas during the trials. So we are responding to concerns. We now require that searches and leasehold documents are commissioned before the property goes on the market, which will eliminate the problem of preventing homes from being marketed quickly, while still reducing delays in the current system when these documents are not requested until after an offer has been accepted. In addition, we have also proposed making the provision of energy performance information in the packs more robust, which I will come to when I address the provisions in the Bill.

In November, the first phase of the area trials got under way in six regions and we have adjusted our policy in response to that. In the past couple of weeks, those trials have moved to two new areas in London and north-west Wales. As we have made clear, these trials will also be subject to independent scrutiny, and we look forward to examining the results of that research as the roll-out of HIPs moves on. We also published the baseline research last month, which supports our view that the measures, when implemented, will improve the home-buying system in the way that I have described. The noble Lord, Lord Redesdale, mentioned curtilage, which I will come to when I talk about Clause 4.

All noble Lords picked up on Clauses 1 and 2. This legislation would require that home information packs should include prominent information about the energy rating of the property. The noble Lord and I agree entirely about its importance. Of course, it will become increasingly important, which is why from 1 June all sellers will have to have an up-to-date energy performance certificate in their HIP before they put the property on the market. As the noble Lord, Lord Taylor of Holbeach, said, this is a requirement of the European energy performance of buildings directive and is a very important first step in the implementation of the directive. As we move towards January 2009 we will extend those duties to provide EPCs to include sale and rental of commercial buildings, and the rental of domestic properties. They will also be required on construction of all buildings. Public buildings and large buildings with public access will be required to display certificates that indicate how well the building is performing year on year.

Not only will we provide what the noble Lord is asking for, but we will go further. Perhaps I may explain why. The noble Lord’s Bill would require that energy ratings appear prominently in HIPs; but under our regulations not only the rating but also a full energy performance certificate, including important recommendations about how to improve the energy efficiency of the property, will be included. As we finalise what these might look like, I would be very happy to share that with noble Lords. In response to the noble Lord’s query, of course my officials would be delighted to meet him to talk about the issues that he has raised on the Bill.

The EPC will be prominent in the pack because it will be the first document and will be extremely visible; therefore, buyers are bound to be aware of the information contained. It will enable sellers to improve energy efficiency, and they would be advised about how that might be achieved. We all know how new owners set about altering properties after they move in, and this extremely important and useful document will inform them how they can make energy efficiency improvements.

It will also enable owners to save money on their fuel bills, a point raised by my noble friend Lord Whitty. Several noble Lords addressed the issue of rising costs, and the Energy Saving Trust (EST) has shown that the average property owner will be able to save about £300 a year on energy bills if they follow the low-cost recommendations on their energy performance certificates. Anything that influences people to make positive decisions and choices is important. As my noble friend Lord Whitty said, price will do that. So that is all very good news about how we are facing up to the challenge of reducing carbon footprints.

We are going with the grain of what people want. An independent survey of customers suggests that 75 per cent think that the EPC is a good idea. So, again, the proposal is extremely well intentioned but there is no need for primary legislation.

On Clause 2, how will we ensure that the documentation produced is included in marketing the property? Again, we are in full agreement on this. It is important that this should apply not only to houses but to the contents of houses; we need to know where energy is being used, whether by fridges, cars or houses. This level of awareness is crucial as we attend to the pressures and speed of climate change.

This is why in the HIPs update, to which I referred earlier, we have proposed that the details of the energy performance certificate should be attached to written particulars by estate agents. I am sure noble Lords will agree that, if we do this, we will have to make it practical and proportionate as well as informative. That is why we are consulting on the proposal, and the final decisions will be based on the results of consultation on the HIPs update. We are looking at ways to make the information as visible and accessible to consumers as possible while being consistent with the principles of energy efficiency. We do not want to end up printing reams of paper. It is an iterative process and how we deliver it through estate agents’ advertising material will be informed by the views of the industry.

The noble Lord, Lord Taylor of Holbeach, asked about the number of inspectors. We are confident that there will be sufficient home inspectors and domestic energy assessors to meet the requirements of the market. Our constant discussions with stakeholders suggest that there is very high interest, particularly in the DEA qualification. Two awarding bodies have already had their DEA qualifications approved and another is close to receiving approval. We are demonstrating what we expect in a series of road shows and, as EPCs are extended to buildings for rent and sale and to all buildings, there will be an increase in demand. We estimate that there will be a need for between 1,600 and 4,300 inspectors for mandatory EPCs and voluntary HCRs for HIPs. At the moment we have 290 qualified home inspectors who can produce both and a further 1,100 still in training who have already completed enough of their course to be able to qualify by 1 June. Details of the DEA qualification can be found on the websites of the awarding bodies. Perhaps it will be useful if I write to the noble Lord with the information that he requested.

Clause 3 is very important in relation to council tax. We are entirely at one with the suggestion that there should not be any disincentives to people from improving the energy efficiency of their home. We endorse that wholeheartedly. It again provides an opportunity to refer to the HIPs update document, which repeats the Government’s support for locally run incentive schemes such as the one piloted in Brentford, which encourages home owners to improve the energy performance of their houses. We expect the EPCs to encourage home owners and home buyers to improve their domestic energy performance.

I want to make it clear to all noble Lords who have raised the issue that home owners installing energy-efficiency equipment will not see their council tax bills rise as a result. First, any change or improvements to a property that increase its value cannot result in a higher council tax band until the property is sold or any future evaluation of properties takes place, but even then the width of the banding system, which is very generous, means that only an improvement that significantly increases the value of a property is likely to push it into a higher band. It is therefore very unlikely that installing microgeneration equipment or energy-efficiency measures will affect the banding of the building, so we do not see that there will be much scope for these perverse effects.

On the question asked by the noble Lord, Lord Taylor, about the non-domestic rates, the Valuation Office Agency similarly advised that installing microgeneration equipment might lead to no change, or a negligible one, in a business property’s rateable value, and hence the rates bill. Obviously the valuation officer would reassess the rateable value of the property at the time the equipment was installed and measure the effect on the rental value, but that is the best evidence we have had from the VOA. We have to remember, with regard to some of the other questions the noble Lord raised about the nature of the technology, that this is new technology. There is at present no evidence available to the Valuation Office Agency regarding, for example, the development of a two-tier market for commercial buildings with or without microgeneration equipment in the way that there is for buildings with or without heating. Again, we will have to wait and see and use our best intelligence to gauge how that might operate.

I shall pick up some of the other questions on Clause 4 and the whole business of planning and microgeneration, an issue close to the heart of government policy. This might be the point at which I should address one more question from the noble Lord, Lord Taylor, on the business of the Government giving a lead on microgeneration in terms of their own stock. He is right that in June 2006, following the microgeneration survey, the Government set an aspirational target to reduce carbon emissions from central government buildings by 30 per cent by 2020. In fact, we have committed to making the central government estate carbon neutral by 2012, so we will be working with that challenging target in mind.

I return to Clause 4. Our planning system does and should help to shape places with lower carbon emissions, places that are resilient to climate change. Our ability to respond to those challenges—the way we live and where we live—will pose new challenges to the planning system. That ability to respond properly will be at the heart of what we expect from good planning. Again, we have anticipated much of what the noble Lord wants. However, the microgeneration strategy in March 2006 identified that the installation of microgeneration equipment is currently constrained by uncertainty over its planning status, inconsistent treatment by local planning authorities and the costs and time involved in obtaining planning permission.

We said in that strategy that we are committed to reviewing whether we should do anything further to facilitate the installation of microgeneration through the planning system, particularly through local plans and for householders. We followed that up on the two relevant fronts; first, through planning policy itself, and, secondly, through committed development rights. We issued a Ministerial Statement in 2004 that built on the existing planning policy statement on renewable energy, PPS 22, issued in 2004, which noble Lords will know is the core of our planning arrangements in terms of building renewable energies into our planning policies at spatial and local level.

We have launched a public consultation on a new draft planning policy statement on climate change. We have carried out a review of permitted development rights for householders. I want to say a little bit about the chronology of what we have done in those two respects. We in the DCLG have worked closely with the DTI, and we continue to do so. The basis for our approach in the report, set out in PPS 22, has made it clear that planning bodies are expected to identify in their broad areas where developments of particular types of renewable energy may be considered appropriate. Areas in agricultural use will be considered as part of that process. On 8 June 2006 Yvette Cooper issued a Written Ministerial Statement, sent to every planning authority in England, reminding them of that guidance, urging them to take advantage of it and making clear that all planning authorities are now expected to include policies in their development plans which require a percentage of the energy for new developments to come from onsite renewables, where that is viable. That is an extremely important tool.

Just before Christmas, we issued the draft planning policy statement on planning and climate change, which is currently the subject of consultation. That complements PPS 22 and the statement, and makes it unequivocally clear that planning is a positive force for change. It includes strong expectations at regional and local level that low-carbon technologies must be properly planned for.

Finally, and most important, we have been reviewing whether permitted development rights should be extended to domestic microgeneration equipment in accordance with Clause 10 of the Climate Change and Sustainable Energy Act 2006, to which the noble Lord, Lord Taylor, referred. We are aware of the size of the challenge and want to see as much innovation as possible.

Following our review, we have been working out proposals for extending permitted development rights for householders to install certified categories of equipment without the need for planning permission. Given what noble Lords have said about their valiant efforts, it seems that everyone who has spoken is living in a particularly windy part of the country. We will shortly be issuing public consultations on those proposals and will look forward to your Lordships’ responses.

That is the context in which we are considering the Bill. On the implications of this clause, I should like to mention the further action recommended by Kate Barker in her recent review of land-use planning, published in December 2006. She proposed that, to help to combat climate change, permitted development rights for the installation of microgeneration equipment should be further extended to other uses beside domestic. She specifically mentioned commercial uses, and we will want to consider the scope for including agriculture in our response to this proposal. We will make our intentions clear when we bring forward our planning reform White Paper.

Encouraging the take-up of microgeneration through a clearer planning framework will help us to meet a significant proportion of our future energy needs. When we talk about extending permitted development rights, whether domestic or otherwise, we must not disregard our responsibility to protect neighbours, the wider community and the environment from adverse effects such as noise vibration. We must have a serious regard for that. Therefore, our proposals will be based on careful assessment of impacts. Any extension of permitted development that we consider will also use that approach and be subject to full consultation.

On the specific point of curtilage, I agree that there is potential for agricultural land near to housing to meet domestic needs. We are seeing more of this but it generally requires planning permission. It is quite difficult in some areas to install even small turbines on agricultural land without planning permission. We would be happy to discuss this further with noble Lords.

The noble Lord, Lord Taylor, asked about the low carbon buildings programme. Together with the £45 million committed under the previous clear skies and solar PV major demonstration programme, it will give an anticipated £125 million in support of the industry by 2009. I cannot answer the specific question about assessment but I would be happy to write to him about that and about his rather technical questions about the national grid. However, the noble Lord, Lord Redesdale, may have fuller and more detailed responses for him.

While we cannot change planning matters overnight, I believe that in the period since 2004 we have moved very swiftly to address these issues and to take advantage of the potential. We intend to do so, as these processes move forward.

Clause 5 would oblige mortgage lenders to offer reasonable-rate loans for energy efficiency improvements. This is again very much in the spirit of what we are trying to do, but the noble Lord will have anticipated the reply that I have to give: it must be for lenders to decide on the products they offer to consumers. While we would encourage green products, we cannot force lenders in that way. However, we are supportive of all the initiatives to encourage energy conservation which are being taken by the lending industry. We are working with the industry to find ways of developing them further on the back of EPCs.

I hope that the noble Lord feels that, although we cannot go all the way with him, we are certainly on the same journey in many ways. We have overtaken him slightly in some ways, too. It has been an important and interesting debate because it has raised the visibility and the profile of the issue as a whole. From around the House, unique contributions have been made, which show that essentially we are all committed to the same direction of travel. I look forward to the next stages of the Bill.

My Lords, I thank the Minister on two counts. First, I realise that she and her officials have gone beyond trying to meet some of concerns set out in the Bill. We are fellow travellers, as is everybody who has spoken, in trying to save carbon. I understand that the devil is in the detail of some of the clauses and that they will need to be looked at. I was quite shocked on talking to the HIP people to learn that if we had gone forward with Clauses 1 and 2, either 18 million or 180 million—I do not recall the figure—pieces of paper would have had to have been printed to meet the requirements, so I quite understand that the Minister might not think that that is such a good idea. However, I believe that Clauses 1 and 2—we have figures on this—would have saved millions of tonnes of carbon in the next decade, which should not be underestimated.

I thank the Minister on a second count. It is traditional for all questions in a Private Member’s Bill to be directed at the originator of the Bill, so I thank her for answering some of the detailed questions on which I would have been completely lost. I could not even have said that I would get my officials to write to noble Lords, because my researcher, who has done such valiant work on this Bill, is leaving at the end of the week.

The debate has given me a great deal to think about, especially the notion of the noble Lord, Lord Watson, on who gets payback on a kitchen. There is never any payback on a kitchen, although there would certainly have been payback if I had not agreed to mine. I shall look at certain aspects of our debate. Perhaps we can discuss in Committee a much slimmed-down and more logical Bill.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at 4.08 pm.