My Lords, the noble Lord, Lord Jenkin, and I have Amendment 48 in this group. The group also includes Amendment 51, tabled by the right reverend Prelate the Bishop of London, which would insert a new clause.
When the draft Energy Bill was published in May 2012, a number of people were concerned that there was not sufficient indication of measures to reduce electricity demand, which is obviously the most satisfactory way of avoiding having to build further power stations. Both in the pre-legislative scrutiny in another place and in the informal committee chaired by the noble Lord, Lord Oxburgh, the question of demand-side measures was discussed. As a result of that, the Government launched a consultation in November last year and suggested a number of options for electricity demand reduction. Interestingly enough, out of the
options on offer, a majority of the respondents favoured a system of electricity efficiency premium payments, which would provide electricity users with a payment on top of the savings that result from reduced use of electricity.
However, when DECC published its consultation response in May this year, it suggested that its preferred route to delivering permanent reductions in electricity demand was via a capacity market. That was of course contrary to the majority of the views expressed in the consultation. Similarly, the response dismissed the idea of introducing a premium payment without adequate explanation. None the less, on Report in another place, the Government introduced Clause 37, allowing the Government to run a pilot scheme for electricity demand reduction. The clause does not explicitly limit the Government to a single pilot or specify the mechanism that they might use. However, given what the Government said in their response to the consultation, there is a pretty clear indication that they wish to look at the capacity market only.
There are a number of uncertainties about the appropriateness of the capacity market, particularly for small and even medium-sized consumers. I am not sure what the right reverend Prelate might say about churches which are considering reducing their electricity demand and whether they would be large enough consumers to go into such a capacity market. None the less, there was a discussion in Grand Committee on an amendment that I tabled suggesting that there should be more than one pilot so that various methods could be explored as ways of dealing with this question of electricity demand reduction. Amendment 48, which I and the noble Lord, Lord Jenkin, have tabled, requires the Government to bring forward multiple pilot schemes so that not just the capacity market but premium payments and perhaps some other form of incentive could be considered. That would demonstrate which scheme or schemes might be most effective in delivering permanent demand reductions and scale.
I very much hope that the Government will give serious consideration to this proposal because I believe it will give us rather more information as a result of the pilot in order to make decisions as to what can be done. I should say that I have a good deal of sympathy with the new clause tabled by the right reverend Prelate which calls on the Government to prepare and implement a strategy for delivering further reductions in demand which the Government themselves say is achievable.