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Electric Vehicles: Impact on Household Energy Bills

Volume 813: debated on Wednesday 23 June 2021


Asked by

To ask Her Majesty’s Government what assessment they have made of the impact on household energy bills of Ofgem’s proposals for powering electric vehicles, announced on 24 May.

I beg leave to ask the Question standing in my name on the Order Paper, and I refer to my interest as president of National Energy Action.

My Lords, under their green recovery scheme, electricity distribution network operators will accelerate £300 million of investment into network reinforcement to support low-carbon projects, including electric vehicle charge points. About half of this will be sourced from efficiencies delivered by network companies, with the rest from new funding. Ofgem estimates that this will translate to an additional 65 pence on consumer bills for the next two years. This will decrease to around 15 pence from 2023.

I thank my noble friend for the Answer. Many will welcome this investment, but why are households, many with no car, electric or otherwise, picking up the lion’s share of the bills for not only the rewiring of electric vehicles but the cost of renewables and meeting net-zero commitments? I urge my noble friend and the Government to be more transparent, so that consumers know exactly who is paying for what.

The noble Baroness makes a very good point, but the transition to net zero will affect everyone, and everyone will benefit from avoided climate change impacts and cleaner air. Ofgem publish on its website a breakdown of the costs that make up a consumer’s energy bill. These include the costs of maintaining and upgrading the electricity network, typically about 20%, and social and environmental obligations, also around 20%. The Government are very conscious of trying to deliver transparency.

My Lords, does my noble friend agree that if people will be spending 30 minutes charging their car, we would like them to do that where we would like them to be spending 30 minutes—that is, next to the high street? Will the Government look at what obstacles there are to provision in that sort of location and set about removing them?

My noble friend makes a very good point about trying to increase footfall on the high street at the same time as increasing the use of electric vehicles. The on-street residential charge-point scheme is available to all local authorities to provide public charge points for their residents who do not have access to private parking. To date, the scheme has supported over 105 local authorities to fund over 3,900 charge points, and this year another £20 million is available to ensure that more local authorities can benefit. Additionally, I am aware that Ofgem are talking to people such as Costa Coffee and Marks & Spencer to see whether we can put more charge points at their out-of-town sites.

My Lords, if home electricity prices apply, the cost per mile to propel a typical electric car will be very much lower than that needed to propel a fossil-fuel car. However, two-thirds of the cost of petrol and diesel is duty and VAT. Do the Government plan to tax electricity for electric cars in a similar way, or will they retrieve the approximately £30 billion lost to the Exchequer by other means, such as the long-rumoured road pricing, and how would such changes be phased in?

The noble Lord will appreciate that matters of taxation are for the Chancellor, but the Government have set out that, as we move forward with this transition away from petrol and diesel cars and vans, we will need to ensure that the tax system continues to encourage the uptake of electric vehicles. Revenues from motoring taxes must keep pace with this change to ensure that we can continue to fund the first-class public services and infrastructure that people and families across the UK expect. I am sure that the Treasury will be looking at other ways of taxing electric vehicles in the future.

My Lords, I declare that I am an owner of an electric vehicle. Will the Minister accept that the Government’s determination to push forward with electric vehicles is not keeping pace—or anything like—with in particular the extent of off-street charging points at home, and that it is not sufficient to say that this is the responsibility of local authorities? They need much more generous subsidy support from the Treasury to match anything like what Oslo had when I witnessed it five years ago: extensive stanchions for electric charging outside people’s homes. That is where we need to be.

I agree with the noble Lord. The Government are determined to increase charging points, on-street and near homes, but also at motorway service stations and on the road system. We have announced a £1.3 billion fund to accelerate the rollout of charging infrastructure, targeting support on rapid charge points on motorways and major A roads, to dash any range anxiety around long journeys. We are installing more on-street charge points near homes and workplaces to make charging easier—as easy as refuelling a petrol or diesel car. We will publish an infrastructure strategy later this year. I do not agree with the noble Lord: on international comparisons, we are doing pretty well on charge points. I think the only country that has overtaken us is Holland.

What plans do the Government have to address the substantial differences in costs for electric-vehicle owners between those who have off-street parking and can charge from their domestic electricity supply and those who do not and consequently have to pay fees to charging companies, which can be up to six times as high as domestic electricity prices?

I am aware of some of the much higher charges for on-street charging, but the Government want to ensure that lack of access to off-street parking is not a barrier to realising the benefits of owning a plug-in electric vehicle. The on-street residential charge scheme is feeding through to local residents via their local authorities, to enable them to charge outside their homes and on the high street, as I have previously mentioned. The A-road system and the motorway system are also gaining a huge amount of investment to install at least six very rapid charging points in service stations.

With the Government already reducing the grant for new electric vehicles, and around half of the £300 million of Ofgem’s additional support coming from savings from other projects, the remainder will need to be met by consumers. How do the Government propose to make the transfer to electric vehicles affordable and to distribute new charging points effectively and equably across all regions of the UK?

We pledged a further £582 million in grants for those purchasing zero-emission or ultra-low-emission vehicles to make them cheaper to buy, alongside generous tax incentives. We are also working with industry to deliver a market-led countrywide rollout of charging infrastructure. Our infrastructure strategy, which will be published later this year, will set out how we intend to measure progress in charging infrastructure provision and to ensure that there are enough in the right locations to support the phasing out of petrol and diesel vehicles.

My Lords, I know that my noble friend is very aware that the move to electric vehicles will introduce significant new challenges to the grid, but can she provide an assurance that Her Majesty’s Government are also taking into account the requirements on the electricity grid to enable 600,000 new heat pumps each year? Can she share with the House what estimates exist for the cost of upgrading the grid to support the mass introduction of both electric vehicles and heat pumps?

My noble friend is absolutely right: we do expect the transition to electric vehicles and heat pumps to create significant new demands for electricity. Ensuring that local electricity networks are prepared for current and future demand is the responsibility of the distribution network operators—the DNOs—who are incentivised to do this through the regulatory framework known as price control, set by Ofgem. This includes making additional funding available via uncertainty mechanisms, which allow DNOs to access funding for net-zero-related projects that were uncertain at the start of price control but become more certain later on. As electricity becomes a common fuel, it will bring certain challenges, which the Government are endeavouring to address.

My Lords, I have just bought my first EV, and it has been a salutary experience. A cable of the length that we require to charge direct from our home is out of stock. We also planned to have a charge point in our garden, but our installer, one of the major players, did not have the standard model in stock. It has had to be imported from the Netherlands and has been delivered late. From order to installation will have taken nearly seven weeks. Does the Minister agree that, if public confidence in EVs is to grow, the EV industry must radically improve and foreshorten its processes?

It is very unfortunate that the noble Lord’s home charge-point installation took so long. I do sympathise. There are over 5,000 installers. There are 50 charge-point manufacturers registered with the Office for Zero Emission Vehicles to install charge points under the electric vehicle home-charge scheme. This should provide a range of options for drivers to get a charge point installed. The infrastructure strategy will set out how we intend to measure the progress of these charging infrastructures being delivered to the home as well as to the high street.