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Energy: Prices and Supply

Volume 823: debated on Thursday 14 July 2022


Asked by

To ask Her Majesty’s Government what steps they are taking (1) to address rising energy prices, and (2) to ensure the security of the United Kingdom’s energy supply for the coming winter.

My Lords, the Government understand the pressures people are facing with high global energy prices and are providing support for the cost of living totalling £37 billion this year. Great Britain has secure and diverse supplies of energy but we have acted to boost electricity security, including by temporarily extending the operations of certain coal-generation units to provide back-up capacity if needed.

My Lords, it is acknowledged that the UK is not directly dependent on Russia for the supply of natural gas. However, do the Government recognise that the Russian situation could cause gas supply shortages in mainland Europe, which could have a domino effect that could impact the UK, including Northern Ireland, particularly at a time of high energy prices? What measures are in place to address this issue?

The noble Baroness is of course right, and the answer to the question is yes, we recognise this maybe unlikely risk, which is nevertheless a risk. That is why I indicated in the Answer that we have acted to secure additional back-up capacity if needed for this winter.

My Lords, there is a good deal more we can do internationally with our like-minded friends to curb the appalling increase in energy prices which is about to hit households in this country yet again, and even more ferociously. However, does my noble friend accept that in fact, indirect taxes on energy add to the headline consumer prices index, and that if one could bring that down, it would also vastly reduce the Government spend on having to update their outlays on index-linked causes, including benefits? Does he accept that if you take down one, you will take down the other? I do not think that is widely understood by the social experts and commentators in the press, and I wonder whether it is understood by the Treasury. However, it is a way forward.

My noble friend is tempting me to say what is understood and is not understood by the Treasury, which is perhaps a road I should not go down. Of course, the point is right. The contribution of energy to the consumer prices index is particularly important, and my noble friend is also correct about the proportion of indirect taxes on energy bills.

My Lords, the Conservative manifesto of 2019 stated:

“We will help lower energy bills by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.”

Now that we are over half way through this parliamentary term, exactly how much money has been spent—not planned to be spent—on the energy efficiency of homes and other buildings?

Certainly, we are well on the way to that commitment, and this spending review period allocated about £6.6 billion towards those targets. For example, we have spent £471 million to date on the social housing decarbonisation fund and £350 million on the sustainable warmth programme, and we are going out to bids later this year for another £800 million of spending under the social housing decarbonisation fund, so we are making considerable progress.

My Lords, does the Minister agree that it would make more sense to incentivise investment in the skills and technologies of the future, rather than in oil and gas companies, which are soon to become technologies of the past? Is there not a danger that investment in oil and gas could lead to stranded assets and stranded jobs?

The noble Baroness is partly correct. Of course, we need to invest in the technologies of the future, which is why we are developing our green finance policies and a green taxonomy to help direct investment in those technologies. However, we will also need oil and gas as transition fuels, so it makes sense to continue to exploit our own resources.

My Lords, picking up on the noble Baroness’s original Question, it was reported in the Financial Times about 10 days ago that under the UK’s emergency gas plan, if our gas supplies fall short the United Kingdom will cut the supply of gas to Europe via the so-called interconnectors. Can my noble friend tell us whether that is the case?

My noble friend will understand that I am not going to get into discussing emergency situations. Anything as drastic as that is extremely unlikely. All parts of Europe benefit from interconnected supplies of electricity and gas. It helps to secure both our energy supplies and resilience for our future, and that of other European countries.

My Lords, I declare an interest as vice-president of the Local Government Association.

The Government’s failures in energy policy go back over a decade, including on energy efficiency. Homes are still being built that do not meet minimum standards of efficiency and will require significant retrofitting in the near future to meet legal standards. As mentioned in the recent Climate Change Committee report to Parliament, the promised future homes standard and changes to the planning system have not yet been delivered. Can the Minister inform us, either now or in writing, how many homes not meeting minimum standards of efficiency have been built since the close of consultation in January 2021? Also, how many planning permissions are in place to allow the building of such substandard homes before June 2023? How many housing units does that amount to?

The noble Baroness is asking for some detailed statistics which I do not have to hand, but I will certainly write to her about that. There is a considerable uplift in the building regulations coming next year. The future homes standard is coming in 2025 and when it is introduced, the carbon efficiency of homes will be increased by about 75%.

The Minister will be aware that President Biden is on an energy-related play to Saudi Arabia. Was there a positive upshot of our Prime Minister’s visit to Saudi Arabia with the noble Lord, Lord Grimstone, on related matters? If so, what benefits were accrued?

The noble Viscount makes a good point. The Prime Minister and my noble friend Lord Grimstone visited the UAE and Saudi Arabia on 15 and 16 March. They met leaders of both countries and had some extremely productive discussions about collaboration and the importance of maintaining energy security and working together to help the green transition.

My Lords, I declare my interests in respect of National Energy Action.

I welcome Ofgem’s ruling that overpayments of grossly inflated direct debits will be rectified. However, does my noble friend not question why the standing charge on each household bill has increased by up to 50%, given that this goes to distributors whose costs have not increased to the same extent as those of electricity suppliers? Should this not be urgently investigated?

Ofgem does look very closely at connection cost standard charges and direct fuel costs. Funding the transition from a big node-type power supply to lots of more diverse, renewable sources of energy requires considerable investment in our transmission system. In order to expand the use of electric cars, heat pumps et cetera, we must reinforce the electricity supply system, which of course needs to be paid for.

My Lords, currently the Government tax people heavily, especially the poorest. They then hand back a few pounds to the people, helping with energy bills—and it is promptly handed over to the energy companies. In this circuit, there is no check whatsoever on curbing inflation, energy prices or corporate profiteering. Why are the Government neglecting these three things?

I am afraid that I simply do not agree with the noble Lord. A number of aspects of his question were wrong. The Government are not handing money over to energy companies: the money is going directly to consumers—more than £37 billion of expenditure. The noble Lord might think that that is a few pounds, but I think it is a considerable sum of money. Clearly, energy prices are likely to go up again in the autumn, and that is something we will need to return to.

Can the Minister reassure the House regarding when energy security last appeared on the agenda of, and was discussed by, the Joint Committee on the National Security Strategy?

My Lords, nuclear is crucial to our future energy supply. Will there be an announcement before the House rises next Thursday about Sizewell C and all of the decisions that have been delayed?

The noble Lord makes an important point and I completely agree about the importance of nuclear and Sizewell C. Negotiations are continuing; I think it unlikely that there will be an announcement before the House rises.

My Lords, commendably, the Government are trying to shield households from these excessive rises in energy costs. However, will my noble friend consider carefully the excellent point made by our noble friend Lord Howell: that cutting fuel duties could indeed set up a virtuous circle? Given the extent of the rise in fuel costs, households surely need time to transition to this higher-cost environment. A tax cut, as long as it is passed on to bill payers, could assist in that transition.

This has of course been a source of considerable debate in the current leadership contest. I am sure that the new Prime Minister and the new or existing Chancellor will want to consider these matters very carefully. As I said, we have already supported households to a massive extent, but given the inevitable rises that are coming down the line later in the year, I am sure the Chancellor will want to look at these matters again.