My Lords, I congratulate my noble friend Lord Ahmad on his work today and on his future work on DECC matters. It is excellent to have him with us and to have him involved at this stage of this Bill, which has a long way to go through its parliamentary process. I follow up those congratulations by saying how pleased I was, along with many of my colleagues, to see the Government’s persistence in the Queen’s Speech on this agenda of zero-carbon homes. It is a really important policy and one that started in 2006, under the previous Government. It has been followed through on a trajectory right through to the present day. It is really important.
In Questions in the Chamber earlier today, we had a Question about fuel poverty. We are very aware that the standard of homes that we build now will affect our housing stock for perhaps 50 or 100 years, so it is really important that we get it right now, not just in terms of carbon emissions but in terms of energy costs and the standard of living of our citizens. Therefore, although this is a minor part of the Bill in certain ways, it is very important in terms of future sustainability for our climate and our society.
I congratulate the Government on the DECC side for their publication today, Delivering UK Energy Investment, which I believe is being launched by my right honourable friend Ed Davey, the Secretary of State for Energy and Climate Change. In it, we note that the Government have enabled some £45 billion-worth of investment in electricity generation networks from 2010 up to 2013. That shows the strength of the Government’s policy on energy over the past three years, in the time of the coalition Government.
One problem with this Bill is that, although it talks about zero-carbon homes, just as my noble friend the Minister stated, obviously and clearly—and I looked through the Building Act 1984 this morning in the Library of the House to enlighten myself on its schedules—none of this is required for most zero-carbon homes building regulations to be implemented. They are all within ministerial discretion through the building regulations, but the area of allowable solutions covered by the amendments and this section enables the last piece of that jigsaw to be put into place.
We are coming towards the end of the Parliament. Whatever we decide in this Parliament, how building regulations are delivered subsequently is out of our
control. We are here now with a very clear view of where we want to get to in the future, and we need to tie some of these things down rather more than they can be at the moment—hence a number of my amendments. They are not all about allowable solutions; they affect some of the more fundamental areas of zero-carbon homes as well. That is the difficulty. As a Parliament and as a House, we do not have a lot of detail on where this is all going to take us and how it will be interpreted; we have only a strategic understanding of that. I would like the amendments to nail down a little more—to find out from my noble friend the Minister and the Government—the intentions in how we deliver this. I was keen not to degroup the amendments, so I ask the indulgence of the Grand Committee—I shall be as brief as I can—by going through the four amendments that I have tabled. I am talking primarily about Amendment 93AA, but I will also talk to Amendments 93AB, 93AC and 93AD.
I move on to Amendment 93AA. I agree entirely with allowable solutions; they are a legitimate and important part of the zero-carbon homes deal. Clearly in certain types of property—flats, multiple accommodation dwellings and apartments—it is quite difficult to get zero-carbon home solutions within the actual building itself, and it is generally accepted that those are needed. When they were first talked about, it was in a fairly narrow sense. In fact, I shall quote the most recent report of the Committee on Climate Change—the Government’s adviser on this sort of thing—which came out last week, Meeting Carbon Budgets—2014 Progress Report to Parliament. On this general area, it states that:
“For new-build homes, Part L has been tightened twice since 2010, as part of Government commitments to achieving a zero-carbon home standard from 2016 in England … In 2010, a tightening of part L resulted in a 25% improvement in energy efficiency for both new-built and extensions compared to … 2006 … A further tightening of Part L by between 8 and 26% was proposed for 2013, as well as a requirement for consequential improvements for extensions and boiler and window replacements”.
But the important thing stated by the Government’s own adviser is, however, that,
“this policy was delayed and watered down, in the end requiring only a 6% improvement in CO2 emissions for new-built homes from April 2014, with no further improvements to extensions or windows and no requirement for consequential improvements”.
We have that difficulty. Then it states:
“Applied to on-site electricity generation the ‘allowable solutions’ mechanism is sensible, given that large-scale off-site generation is often a cheaper way to provide low-carbon electricity. However, when applied to heat and efficiency measures it is problematic. For all new houses policy should require that either low-carbon heating is installed or efficiency is so high that heating requirements are minimal”.
It is that sort of theme that I want to try to get to to make sure that we ramp this up.
An important principle is that, although allowable solutions should be open to be used, they should be used only as a last resort. However, if they are used, I think that they should be able to be used locally. I shall come on to that when I talk about Amendment 93AB.
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What really concerns me is that we have an exemption which has been discussed as part of government policy on small developments. I understand the Government’s policy in terms of deregulation and trying to stop SMEs being clogged up with red tape. I fully and absolutely identify with that, although regulation is important in certain areas, such as buildings regulations. However, in Amendment 93AA I am trying to say that we need to be very careful about how this exemption is used. I have suggested that it should not be used for developments with more than five buildings and that the exclusion should have a sunset clause with a date of 2018.
To be honest, I do not understand why this exemption is really needed. Perhaps I may again quote the Committee on Climate Change. Its report said that,
“the Government has announced that small developments (with the size affected to be consulted on) are to be exempt from part of the zero carbon requirement. There is a risk that a substantial number of homes could be affected. For example, in 2013, 37% of planning applications were for sites of 50 or fewer homes, and 12% for 10 or fewer homes (according to research ...) … As developers often split developments into several smaller phases, the exemption could affect a significant number of homes. This could ultimately raise the costs and risks of meeting future carbon budgets.
No rationale has been provided for the exemption for small developments. It is not clear why the economics of efficiency measures or low-carbon heating should significantly differ from larger developments”.
Therefore, there are questions about this proposal.
This issue does not relate specifically to SMEs; it could also relate to large housebuilders with small development schemes. However, it is very condescending to small developers. My experience is that small developers are equally able to deliver high-quality products—in fact, perhaps even more so than large developers. Therefore, I do not really understand why this is necessary. Also, it may create a barrier, preventing small businesses growing and making them enter into a new form of quality thereafter. I should like to ask the Minister how that is supposed to work.
In Amendment 93AB, I am saying that the action should,
“take place no more than five miles from the building to which their requirement applies”—
that is, if you are really trying to get some sort of local benefit through allowable solutions, it should be within the local area as much as possible. Specifying that sort of radius would be a good way of doing that.
On Amendment 93AC, there is a real risk in relation to allowable solutions with the low carbon price that we have as part of the European system. Our own carbon price floor is now fixed at £18.08 from 2015. It is easy for developers—it almost gives them a way out—to fund zero carbon by buying European emission system credits at very low prices and saying, “We’ve saved those tonnes of carbon”. That would be a very lazy, although academically and intellectually quite valid, way of doing this. It is very important that we understand more than we do at the moment how this will be implemented. I have suggested through what is
really only a probing amendment that we should say that if there is that route to saving carbon elsewhere, it should be priced in at a sum around £90 per tonne, which is the sort of area where you start to get change in the way that the economy works between fossil and non-fossil fuels and carbon emissions. What concerns me most about this area is that allowable solutions, if not done properly, themselves allow the regime of a future Government to drive a coach and horses through these zero-carbon standards.
There is just one other issue. Coming back to fuel poverty, it is intellectually rigorous to have allowable solutions but they should be a last resort because, for one thing, they still mean that those houses are carbon inefficient and therefore probably energy inefficient. So while the individuals in those houses might have the climate change benefit from carbon saved elsewhere, they do not have the energy efficiency benefits. I am sure that is the Minister’s intent, but this whole area needs to be managed and controlled in a very careful way.