27 May 2010: UK bills and bonfires

The new UK government has now announced its legislative programme for the next 18 months and there is to be another energy bill. This is a good bill and should be supported. The government has also announced how it will begin to reduce the deficit. Before the election, the Conservatives promised a ‘bonfire of the quangos’ but, so far, the government has named only a handful for abolition. There are several quangos operating on climate and energy issues, and the number could certainly be reduced.

The Department of Energy and Climate Change (DECC) press release says that:

Legislation will be introduced to improve energy efficiency in British homes and businesses, to promote low carbon energy production, and to secure our energy supplies.

“This bill would deliver a national programme of energy efficiency measures to homes and businesses. It may also introduce powers to regulate the emissions from coal-fired power stations, reform energy markets to deliver security of supply and ensure fair competition, and put in place a framework to guide the development of a smart grid that will revolutionise the management of supply and demand for electricity.

“The main elements of the Bill are:

    • Implementation of a “Green deal” to deliver energy efficiency to homes and business – delivering a framework including potential incentives to energy suppliers and households that will transform the provision of energy efficiency in the UK by enabling a ‘pay as you save’ approach.

“The Bill may also contain measures to:

    • Regulate the carbon emissions from coal-fired power stations.
    • Reform energy markets to deliver security of supply and ensure fair competition.
    • Put in place a framework to guide the development of a smart grid that will revolutionise the management of supply and demand for electricity.
    • Require energy companies to provide more information on energy bills in order to empower consumers and to ensure fair access to energy supplies.
    • Ensure that North Sea infrastructure is available to all companies to ease the exploitation of smaller and more difficult oil and gas fields.
    • Create a Green Investment Bank to support investment in low carbon projects to transform the economy.”

(See Department of Energy and Climate Change: Energy Bill 2010.)

The emphasis on energy efficiency is excellent and the pay as you save approach has great potential. It provides a way for property owners to improve the efficiency of their homes, thereby improving comfort as well as reducing energy use, and repaying the cost in amounts less than the reduction in energy bills. The repayment obligation will be attached to the property, not the individual, so this will remove an obstacle that has prevented people planning to move home from investing to improve their property. The reference to businesses in the press release is potentially significant, since companies acting as Energy Service Companies (ESCOs), rather than simply energy suppliers, have been more common and more effective in non-residential sectors than among households in the US and some European countries. No details of what the UK government proposes on this are yet available – the Bill will probably only be published in the autumn – but this should be a priority for UK climate campaigners.

Many commentators have criticised DECC for saying only that the Bill “may” contain measures on emissions from coal and the other points, rather than “will”. However, DECC’s response has been that this is simply because it is not clear whether primary legislation is needed for these measures, not because the government is undecided about them. If primary legislation is necessary, they will be included. That is good news, but there are important aspects still to be revealed. In what way will energy markets be reformed? Greater competition among suppliers is desirable, as is greater regulatory certainty to attract the necessary investment for the low carbon transition. However, these factors may pull in different directions. Supporting exploitation of more difficult oil fields is certainly politically brave given current events in the Gulf of Mexico, very extensively covered by the UK media, not least because a British company is responsible. The Green Investment Bank has great potential, though should cover energy efficiency, as well as low carbon supply, but the minor matter of how much money it will have and where the money will come from has not yet been explained.

Earlier this week, the government announced how it aims to cut £6.2 billion of spending this year. DECC’s budget has been cut by less than some other Department (and one of Cameron’s first acts as prime minister was to go to DECC and stress its importance), but there will still be cuts and efforts to reduce the number of quangos. The Climate Change Committee, currently chaired by former head of the Confederation of British Industry, Adair Turner, has the specific role under the Climate Change Act of advising on future carbon budgets for the entire country. This is an essential role and the Committee is acting in an effective (and not expensive) way, so it should be left alone. As it was explicitly created by an Act of Parliament, so could only be altered through another Act, it probably will be.

The UK also has the Carbon Trust and the Energy Savings Trust (EST). You might think, from their names, that the Carbon Trust deals with low carbon energy supply and the EST with efficient use of energy. However, you would be wrong if you did. The EST is supposed to give advice to individuals, on both efficiency and low carbon energy, and the Carbon Trust to organisations. When I was seeking advice on double glazing for my children’s school, I rang the Carbon Trust but was told that, because I was phoning as an individual (merely a parent, not anything important like a school governor) I should speak to the EST. So I rang EST and was told that as I was asking about a building other than where I live, I should speak to the Carbon Trust. This confirmed my view that the two organisations should be merged. A source of advice from a body other than a government is necessary, but having two overlapping bodies is wasteful. Both also now say that they cannot recommend specific firms to carry out work, as they are publicly-funded and so cannot favour particular private companies. That is fair enough, but there are many cowboy companies operating in double glazing and related fields. It is essential to have accreditation schemes, so that those wanting to invest in energy efficiency or low carbon measures know that we won’t be ripped off. I wasn’t asking for a specific recommendation, only for a list of companies that aren’t cowboys.

DECC also has to decide on the future of the energy regulator, the Office for Gas and Electricity Markets (Ofgem). UK regulation is certainly not perfect, but climate and energy regulation is central. Markets are good, but free markets are catastrophic. Under the Labour government, the talk was of ‘better regulation’, which usually meant deregulation. Nowadays, anything new and trendy is called ‘smart’, so the new and trendy UK government duly talks about smart regulation. Ofgem itself issued a report last year accepting the need for improved energy regulation (see 11 February 2010: UK regulator discovers failings of free market). The government has ruled out the most radical of Ofgem’s scenarios, a central energy purchasing body, but the other options are still quite radical, and remain on the table.

Two other quangos are very important to climate and energy, but are answerable to (that is, paid for by) the Department for Environment, Food and Rural Affairs (Defra), not DECC. These are the Environment Agency and Natural England. The Environment Agency regulates on air and water quality, and is responsible for trying to deal with floods. It is central to nuclear regulation and has also been given the lead role in CCS regulation. It has a less clear role over renewables, since these do not pollute (except some bad biomass plants in the wrong place). It could and should be active in promoting anaerobic digestion, to produce renewable gas, both on farms and at sewage works. The crucial quango on renewables is Natural England, since most opposition is from those worried about landscape issues. Since 2008, Natural England has said that most onshore wind farms should be supported, though clearly its response to any proposal will be case by case.

There was some talk before the election, though nothing official from either Conservatives or Lib Dems, of merging the Environment Agency and Natural England. This would not be sensible. Both are already large, so may need to be slimmed down for financial reasons, but merger would create a behemoth. It would also take attention away from dealing with the issues and onto institutional re-organisation.

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