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Fifth Standing Committee on Delegated Legislation
Tuesday 24 February 2004
[Mr. Alan Hurst in the Chair]
Sustainable Energy (CHP Provisions)
Order 2003
9.55 am
Mr. Andrew Stunell (Hazel Grove) (LD): I beg to move,
That the Committee has considered the Sustainable Energy (CHP Provisions) Order 2003 (S.I. 2003, No. 2987).
It is a pleasure to serve under your chairmanship for the first time, Mr. Hurst. As you know, the formula for statutory instrument debates is a little strange, in that those who object are the ones who formally move the motion. The Liberal Democrats object to the passage of the order and I shall outline why that is the case. In the course of doing that, I shall put several questions to the Minister in the hope that he will at least give some reassurance.
The order as a whole is very disappointing. To those who believe that the search for sustainable energy must be pursued vigorously, it is depressing. Its proposals are minimalist and they are unlikely to achieve either the aims that the Government say they want to achieve or, perhaps more importantly, the aims that were set out in the Bill introduced by the hon. Member for Milton Keynes, North-East (Brian White), which is now the Sustainable Energy Act 2003. That Act gave the Government a duty to set combined heat and power targets for Government buildings. The order is the Government's response to the requirement in that Act. I notice that the hon. Member for Milton Keynes, North-East is not a member of this Committee. I presume that he is too upset to attend.
My criticism of the statutory instrument is not so much about what is in it—it is only a page and three lines—but about what is not in it. I am critical of it for several important reasons. First, it purports to be about CHP, but article 3 is actually about the amount of electricity that the Government will use. The statutory instrument is entirely silent about the use of heat energy and the way in which it can be taken into account or used in Government buildings. It overlooks the carbon-saving value of heat from CHP installations.
Secondly, the order fails to contribute to achieving the United Kingdom's CHP target, set by the Government, of 10 GW of CHP installed and running by 2010. At present, less than 5 GW has been installed; that is less than half the target for 2010. Furthermore, the amount is actually falling. There was a decline in active CHP last year.
Thirdly, what little CHP will be promoted by the order does not have to be generated on site or as part of the heating systems installed in Government buildings, but can be bought on the open market. There may be
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a good argument for that, and I would be interested to hear what the Minister has to say. However, it is clear that if there were an on-site requirement or a Government estate requirement, there would have to be construction, installation and use of new CHP, which would contribute to the Government's overall targets. That will not be the case if CHP is purchased on the open market. It is not even a requirement that it is sourced from energy generated within the United Kingdom, so we could contribute to combined heat and power installed in Germany, Spain or elsewhere because of the international electricity market. That emphasises the weakness in specifying only electricity. Electricity can be imported from anywhere. It would be different if we are talking about the use of heat, when clearly that would not be the case.
My fourth criticism is that it manages to redefine the Government building stock to exclude around half the buildings occupied by agencies and organisations funded solely by central Government and carrying out central Government functions. Most of those things could have been avoided, which brings me to my fifth criticism: the order has come to the Committee without there having been any meaningful consultation with either the relevant statutory body—the Energy Saving Trust—or the non-governmental organisations and trade associations specifically committed to this area of policy and performance.
What consultation was there with the Energy Saving Trust and what was its response to the order? What discussion was there with the Combined Heat and Power Association, the Energy Systems Trade Association or the British Energy Efficiency Federation? I suspect that the Minister will give the same answer to both questions. My information is that none of those bodies had the opportunity to comment on the draft and that their views, which are in circulation, are critical of and hostile to the order.
I want to enlarge on each of those points, but not at too great length. Although the order is supposed to cover combined heat and power, article 3 refers only to electricity. That means that there is no requirement to install CHP and to use a combined heat and power plant that is either co-located on the same site or in the same building or, indeed, in the same country.
There is a further point. Many Departments have long-term supply contracts. In all probability, much of the order will effectively not come into force until 2009 and perhaps not until 2010. The absence of any reference to heat means that there is no reference to heat connections. It is one thing to be connected to a substation and to enter a contract to take electricity that has been generated by a combined heat and power plant somewhere else, at home or abroad, but a requirement for heat connections would mean that the plant had to be relatively nearby.
Another criticism is that the targets for combined heat and power are a long way from being achieved. The Government's draft combined heat and power strategy issued in 2002 set the target of 10 GW of production by the year 2010. The White Paper last year underlined that and again repeated the target of 10 GW. At the time that the White Paper was
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published there was said to be less than 5 GW of installed capacity. Nevertheless, because there had been a great deal of hype about the need for combined heat and power, a number of companies were actively investing in the technology and marketing it. Major companies were considering it as a way of providing heat for themselves and of gaining some benefit under the climate change levy.
The final form of the climate change levy and the impact of the new electricity trading arrangements mean that much of the existing capacity at the time of the White Paper's publication has been mothballed. The current assessment is that only about 50 per cent. of the installed capacity for combined heat and power is functioning.
During the past 12 months, it is estimated that there has been an 11 MW fall in the amount of CHP that is being contributed to the national supply. Consequently, projects that were on the drawing board have been mothballed and the companies that produce the technology have been closing down and withdrawing from the UK. There have been 250 job losses in the constituency of my hon. Friend the Member for Teignbridge (Richard Younger-Ross) because of the closure of a company in the west country. The industry-wide estimate is that there has been a loss of 2,000 jobs as a result of the stalling of design, construction and use of combined heat and power.
The Government have commissioned several surveys and estimates on the progress being made towards achieving their targets. I understand that so far five separate surveys have been commissioned by them to find out how much combined heat and power is in use. It seems that if one survey produces the wrong answer, another survey is carried out. The most optimistic of the five Government surveys could only imagine that if we were very lucky, we might have 8 GW of installed capacity by 2010, compared with the Government target of 10 GW. We currently have 5 GW of installed capacity and that figure is decreasing.
One might expect that the order was intended to be a significant step forward to reverse the decline and that the Government would set an example. They should not just install and use CHP, but be seen as a beacon or pilot for its use. We would therefore have something that maximises opportunities, rather than shrinking and strangling them.
That leads me to what is contained, and not contained, in the order. It does not promote the construction of CHP on site or the co-location of CHP plant. It does not specify the need for heat connections or the taking of heat. It only refers to electricity, which means that the electricity can come from anywhere, entirely discounting the carbon value that might be achieved from using the heat. The order also means that the CHP power plants that will supply the Government do not even have to be located in the UK, so they may not contribute to our Kyoto targets.
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Norman Baker (Lewes) (LD): Has my hon. Friend noticed that the schedule that defines ''Government'' includes the Department of Health but excludes the NHS estates, which are far more significant in terms of capacity and would lend themselves very well to CHP?
Mr. Stunell: My hon. Friend has many good qualities including, evidently, mind-reading, because he is about a sentence ahead of me. The order applies the weak and feeble requirements that I outlined to the smallest possible list of Government buildings. He explained that the list excludes the NHS, but it excludes many other things as well in article 3(b), which lists eight exclusions. I am sure that it is purely a matter of typography and layout that one has to turn the page to see the remaining item numbered (ix), which is the NHS estate.
The NHS is the largest employer in the country. It has a huge requirement for electricity and power and is clearly part of the Government. I am sure that its exclusion does not mark some unexpected way of announcing the privatisation of the NHS, so why is it excluded? A significant hit could be achieved if it were on the list. The extraordinary thing is that many hospitals already have combined heat and power plants on their premises. The scope would exist if only the Government had the guts to get hold of it.
The other items in 3(b) pose almost as many questions. I cannot imagine why it is thought that the probation service is not appropriate for inclusion. The schedule on the back page of the document relates to article 2. It lists 24 things that are included, but is silent about what they encompass. We have a list of exclusions in 3(b) and a list of inclusions in the schedule. I want the Minister to assure me that the Environment Agency, for example, is included. It is not clear whether agencies are included in the definitions of Departments. What about the Benefits Agency, the Prison Service or the Court Service?
The schedule is opaque. If I thought that the Committee had the patience, I would have brought the thick book of Government agencies that we all have which lists, under each Department, the agencies. They are free standing and intended to be detached from the Government. Are they included? Does the Home Office include the Prison Service? We need to be clear about that.
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