My Lords, I agree with the second part of the amendment proposed by the noble Lord, Lord Teverson, and the noble Baroness, Lady Parminter. It would be rather strange if nothing at all were said on the face of the Bill about the importance of energy efficiency, as it is quite clearly one of the criteria the Secretary of State must always have regard to in conducting a sensible energy policy.
However, I have a problem with the first half of this amendment, which reads:
“to give priority to demand side management and demand reduction measures in preference to increased generating capacity whenever and wherever this is economically appropriate”.
In improving this Bill we are drafting the law. The law has to be unambiguous. The law places obligations on the citizen; the citizen needs to know precisely what those obligations are if the law is going to be effective, dignified and respected. This provision could not possibly from part of a law in that sense. The phrase “economically appropriate” is so vague that it is almost impossible to know what it might mean and where one would need to decide, using this principle, between an energy-saving investment and an energy-generating investment. I notice that the noble Lord, in introducing this amendment, did not actually refer to “economically appropriate”: he used the term “economically sensible”, which he perhaps feels is a synonym. However, the use of a different word only adds to the vagueness and uncertainty, which should not come to rest in the corpus of the law of the land.
I suppose that what the noble Lord might have had in mind with the phrase “economically appropriate”, or even “economically sensible”, is the solution that has the highest economic return, but even that would be a very vague phrase to place in a Bill in the corpus of law. After all, in choosing between one particular project with a relatively high capital cost and a relatively high return and another with a lower capital cost and a lower return, or between a project with a high capital cost and a long payout period and another with the same capital cost and a different payout period, which one to be chosen would depend on the cost of capital, on which one was discounting the projected cash flows. If you wanted to make this a precise obligation, you would have to specify what the cost of capital would be. It would be and should be, of course, different according to the different risks for different types of energy projects, because they would have different risks. Therefore, I do not see any prospect here of reducing the unambiguous guidance that is necessary in law so that the citizen or, indeed, the Secretary of State would know precisely whether he was observing the law or not.