My Lords, I support the theme of these two amendments, particularly the latter one. It is widely recognised that energy demand reduction is one of the cheapest ways to achieve decarbonisation of our economy. I have seen figures—I am not sure whether they came from DECC—which state that energy saving could reduce demand by 26% by 2030. I imagine that that 26% is not from where we are now but from where we would be if we did not have any form of energy demand reduction schemes in place.
It worries me, as the noble Lord, Lord Roper, was saying, that DECC originally said that it would be implementing energy demand reduction via the capacity market. Perhaps I am quite glad that the noble Lord did not find any reference to it in his reading last night because maybe we have got that wrong. To be honest, it makes absolutely no sense. Why wait for the capacity auction next year and implementation in four years’ time before introducing demand reduction schemes? Why wait for a capacity crunch before introducing them? We need these schemes to start now or as soon as possible. As the noble Lord, Lord Teverson, said, we are not talking about energy security or even capacity margins; we are talking about emission reductions across the economy.
I think that I am happy to accept that the Government might want to run pilots here, although the noble Lord, Lord Roper, was absolutely right that we need to put details in those pilots; for example, when the results will be, what will happen afterwards and so on. We have seriously to get on with this.
Lots of opportunities are available. Smart meters are the first that come to mind. A supply company can run machines within a business or a household that are very expensive on electricity—tumble dryers and even dishwashers can wait until the smart meter tells it to turn itself on. Obviously, it should be allowed to be overridden by the householder but the householder must know exactly what cost there will be if he or she overrides the meter. There will be certain times—obviously, when people come home from work and turn on the kettle, or when they get up from watching a film or “Coronation Street”—when the electricity companies know intimately when the peak demand will be. The prices should be allocated accordingly.
I should also say that in future, smart meters could—nay, should—be sensitive to the amount of supply available. If a large proportion of our supply such as photovoltaics or wind turbines is dependent on the
weather, a smart meter should know what the weather is to be tonight at 6 pm when the peak demand is coming and therefore what the capacity margin will be. For instance, in Germany last week—and probably this week as well—at certain times, 33% of the national electricity supply came from photovoltaics. Clearly, at those times there was no shortage of power in the country and no need to restrict demand at all by cost.
The noble Lord, Lord Teverson, also said that demand reduction could be encouraged by better energy rating in housing. I could not agree more. Again in Germany, 360,000 homes have been brought down to near zero emissions by lending money to householders at 1%. Perhaps a pilot could be encouraged on those lines; as we all know, the Green Deal has not been very effective as yet.
However, the most important move, because it throws down the gauntlet to the entrepreneurial flair of industrialists, business people and householders themselves, is to pilot and introduce as soon as possible energy efficiency premium payments. Those schemes have worked very well in the USA and, I believe, could work in the UK if bundled together with grants for capital investment. That could, incidentally, include hundreds of household or office-based batteries linked to the smart meter—so electricity is going in and out of those batteries. Obviously, some help would be needed with the capital expenditure in those circumstances.
The main point is that the Government have to drive that agenda, not just sit back and let it happen via the rather clunky capacity mechanism, which was never really designed for electricity demand reduction in the first place.