Westminster Hall
Thursday 12 June 2003
[Mr. Frank Cook in the Chair]
Energy Issues
[Relevant documents: Energy Issues—A Sustainable Energy Strategy? Renewables and the PIU review, Fifth Report from the Environmental Audit Committee, Session 2001–02, HC 582–1, and the Government's response thereto, Second Special Report, Session 2002–03, HC 471; Towards a Non-Carbon Fuel Economy: Research, Development and Demonstration, Fourth Report from the Science and Technology Committee, Session 2002–03, HC 55–1, and the Government's response thereto, Sixth Special Report, Session 2002–03, HC 745; and Security of Energy Supply, Second Report from the Trade and Industry Committee, Session 2001–02, HC 364 -1, and the Government's response thereto, Third Special Report, Session 2001–02, HC 884.]
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Caplin.]
2.30 pm
Mr. Martin O'Neill (Ochil): May I say, Mr. Cook—
Mr. Deputy Speaker : Order. I would be remiss in my duties if I were not to point out that, when the House took the decision to hold sittings in this Chamber, it decided also that during sittings in the Chamber, certain occupants of the Chair should be addressed as Mr. Deputy Speaker, and I am one of them.
Mr. O'Neill : In order to make you happy, Mr. Deputy Speaker, I shall continue in that vein.
Mr. Deputy Speaker : Order. It is not a question of making me happy: it is a question of abiding by the decisions of the House. I am sure that the hon. Gentleman understands that.
Mr. O'Neill : I must confess, Mr. Deputy Speaker, that I thought satisfying you by going along with the decisions of the House would have made you happy. However, I thank you for giving me the opportunity to open the debate on the energy White Paper.
My introductory remarks will be fairly short, as I am accompanied by the Chairmen of the two other Select Committees that have taken an interest in the subject. We decided that it would be more sensible to deal with all the issues—and to make my hon. Friend the Minister for Energy and Construction even more miserable by having to reply to three speeches instead of only one. However, given the comprehensive character of the White Paper, it should not be too daunting a task for an experienced Minister such as my hon. Friend.
A number of Committees have had a bite at the cherry on the ground that the subject is of considerable importance. My Committee, the Trade and Industry Committee, considered the matter through the
perspective of the needs of industry and the economy. My colleagues will introduce their reports and observations in due course.Prior to publication of the White Paper, the performance and innovation unit report was much anticipated. My colleagues and I considered much of the evidence presented to the PIU, and were able to interview a number of those who presented it. In the course of writing the report, there occurred what Harold Macmillan once referred to as "events". The British energy event was an example of the application of the law of unintended consequences, which, to a certain extent, has changed at least some of our thinking about the time scales involved.
The White Paper laid out the three challenges with clarity. First, the environmental challenge includes taking account of climate change in a way that Government documents had not done before. Secondly, it recognised the decline of indigenous energy supplies. Thirdly, it dealt with the need to update much of the United Kingdom's energy infrastructure.
Perhaps it was because my hon. Friend the Minister was, in a previous incarnation, a football journalist that he said that, following the three challenges, there would be four goals. The first was to cut CO2 emissions by 60 per cent. of 1990 levels by 2050, with evidence of progress by 2020. The second was the maintenance of reliability and the continuing commitment to promote competition in markets in the UK and beyond. The third was to seek to raise the rate of sustainable growth and improve productivity. The last was to give proper recognition—this is the first time that a Government statement on energy has done so—to the needs of the fuel poor and to ensuring that every home is adequately and affordably heated.
Members of the Environmental Audit Committee will want to talk about the objective of a carbon-free economy, and the Select Committee on Trade and Industry certainly dealt with the closure of coal-fired stations and the fact that emissions trading schemes and emissions curbs will have an impact on the viability of several such stations before too long. The Trade and Industry Committee was concerned that any reduction in the number of coal-fired stations—we appreciate that the number of Magnox stations will also fall, and that they will close fairly regularly between now and 2011—could lead to a sizeable drop in our generating capacity in a comparatively short time. The emissions trading schemes may provide a little elbow room for particular stations, but it will disadvantage some of the ageing stations, which are likely to disappear before too long.
Richard Ottaway (Croydon, South): The hon. Gentleman is right to draw attention to the closure of plants at the end of this decade and at the beginning of the next. Does he agree that there is unlikely to be any long-term investment in new plant under the present financial arrangements, because the present financial market simply does not encourage it?
Mr. O'Neill : If the hon. Gentleman will allow me, I shall come to that point in a moment. However, as he helps to make my point for me, I shall not dwell on it.
There is some optimism about the renewables sector but, given the gaps that exist in it, it is perhaps still a little optimistic to believe that, by 2010, we can achieve the 10
per cent. target in our renewables obligation, which is, in effect, a subsidy to renewable forms of generation. However, the failure to achieve the renewables target by 2010 should not necessarily provoke cheap criticisms of renewables. It would be acceptable to achieve the target by 2011 or 2012.
Mr. Simon Thomas (Ceredigion): Will the hon. Gentleman give way?
Mr. O'Neill : I have only a limited amount of time, but I will give way.
Mr. Thomas : On the point about whether we can meet the renewables target, the hon. Gentleman may not know that the Renewable Power Association has produced a road map towards a renewable future. The association says that the industry can not only meet the target but exceed it. If the industry receives Government help, it will certainly meet the target.
Mr. O'Neill : I am very suspicious of any industry or trade group that promotes its own case. The United Kingdom has been bedevilled by trade groups that promote particular forms of generation. People who use windmills are not likely to be any more honest than those who use other forms of generation.
Dr. Ian Gibson (Norwich, North): What a cynic.
Mr. O'Neill : I plead guilty to the charge of cynicism on this occasion.
A sizeable part of our renewables ambitions will focus on wind power, and as we develop it, we shall have to find means of transmitting the electricity at relatively low cost to areas of demand. Anyone who looks at a map of Scotland—the area with the most wind—will see that people do not like to live in windy places. We must therefore transmit the electricity, with all the losses that that involves. As we increase our dependence on wind power from areas where the wind blows most strongly, we shall need carefully to consider the implications for the grid. We shall also need to consider the cost of constructing an alternative grid, not least because we have a problem with the intermittency of wind power. We will therefore need to retain a base load capacity.
I know that some people say that, even if we recognise the decline in nuclear and coal energy and put qualified support into renewables, the short to medium-term answer is gas. Gas could be part of the answer, but we must start negotiations with the Norwegians and others to ensure the supplies. Issues are beginning to emerge with the gas pipeline projects. I was lobbied a couple of days ago by Norsk Hydro, which is anxious to have a brand new pipeline laid—it will finish somewhere near Hull—almost immediately.
Mr. O'Neill : I have given way already, and there is only a short time available for each speaker.
Without taking sides on the question of whether the project promoted by Norsk Hydro is the most desirable way of transporting Norwegian gas, I believe that the
Government must be more forthcoming. Industry and the Government should work together to identify the most realistic interconnecting facilities required to import gas from continental Europe, assuming that we can gain access to the gas that goes through the pipes of monopoly suppliers. For example, the German Lander have monopoly control of some of the pipelines and there may be difficulties, but we must ensure the interconnection.We must also get something that we have never had in Britain—proper storage facilities. The industry is coy about saying what it wants, but the Government should set out how many days' consumption should be reasonably stored and then give the industry the opportunity to deal with a storage facility.
A point was made earlier about investment in new generating kit. The new electricity trading arrangements have been successful insofar as they have pushed down the price of electricity from unacceptably high levels, although they have also put into jeopardy several enterprises, including British Energy. Equally significantly, and not only in a supply situation with more generating capacity, we could reach the point at which our current generating capacity will be inappropriate for our needs in the short term—in about 2010 or 2012. We need price regimes in place, and the British electricity trading and transmission arrangements will afford us the opportunity of tweaking arrangements to secure prices that make it attractive for people to invest. We do not have to do that immediately, but certainly by 2007 or 2008.
By that point, some of the problems that confront the nuclear industry may have been addressed. New reactors may be up and running across the globe and could assist the British nuclear case if it is argued that there should be replacement. I have an open mind on that, but the parlous state of British Energy is a cause for concern, and I would worry about another period of outage of the kind that occurred at Torness, because of the impact that it could have on British Energy's already fragile circumstances. I know that the company is addressing the issue vigorously, but if a reactor went down, it could be in serious trouble.
The days of plentiful energy supplies and low energy prices are probably almost over. That was implicit in the White Paper, but it would help if the Minister reinforced that point as a warning. Prices are beginning to creep up, and businesses that use a lot of electricity are complaining about the impact of the renewables obligation. One can argue that they would say that, but there is a case for recognising that prices will go up.
If the prices of electricity and gas go up by sizeable amounts, the fourth objective—the social dimension of the Government's energy policy—becomes a little frayed. We know that there is a sizeable dependence on social security payments among those who have been taken out of fuel poverty. We have not yet been able to fulfil the ambitious programme of higher building standards, better insulation, and more efficient means of using and generating electricity for disadvantaged domestic consumers. If electricity prices were to rise by 5 per cent., and gas prices by 15 per cent., 800,000 people would return to fuel poverty, and much of the credible progress that has been made by the Government would be lost. It is important that the Government build into their thinking—and into the national consciousness—
the fact that we are no longer able to say that energy prices will be stable. Prices will probably start to rise. If that happens, we must ensure that we have means of generation that are as efficient and environmentally acceptable as possible. We must work in markets that will assist as many consumers as possible. I could go on at considerable length on that matter, but I have probably gone further than I should. My colleagues will wish to embellish what I have said, and raise other points.The document is worth while; it is not a road map, but perhaps a picture of the terrain; the mountains that we have to climb and the ravines that we must cross. If only there were torrents, we could have used them for hydroelectricity. We have enough checks and balances in place—and probably too many Select Committees for the Minister's liking—to keep a close watch on the issue. The agenda is not just for one generation, but at least two generations if we take 25 years to be a generation. What we do in the next 10 years may not necessarily irrevocably change things in the short term, but it could have a great influence over a longer period. To that extent, we should welcome the White Paper, albeit with the qualifications that I have outlined.
2.47 pm
Dr. Ian Gibson (Norwich, North): It is a great privilege to follow my hon. Friend the Member for Ochil (Mr. O'Neill). We often speak together at Burns suppers, which are, quite often, the highlight of a dreary evening in this place. I hope that we will move things forward as a result of today's debate.
I am pleased to present the Select Committee on Science and Technology's report "Towards a Non-Carbon Fuel Economy: Research, Development and Demonstration". We held six evidence sessions. We spoke to research councils, renewable energy researchers, representatives of the power generation industry, environmental groups, the Minister for Energy and Construction, and the chief scientific adviser. We went to Culham in Oxfordshire to see the fusion facility, and we went to Japan where we saw the fusion programme and heard about the investment incentives provided by the Japanese Government. I would like to thank the Clerks for getting us there and back in one piece—a difficult task as there were prolific amounts of saki at times. I also thank our external advisers who kept us on track: Professor Dennis Anderson of Imperial College London, Nick Otter of Alstom Power, and Professor Michael Elves—a former director of Glaxo Wellcome.
We set about the inquiry to look at the role of research development and demonstration in moving the UK to a non-carbon fuel future. We assessed expenditure by public funding bodies, research councils, Government Departments, and the new Carbon Trust. We found that the sums invested in public research and development lacked focus, and were completely insufficient to enable us to meet the renewables targets. The renewables target of a 60 per cent. reduction in CO2 emissions is not an issue on which the jury is out; we are all signed up to it. We must ensure that we achieve it, and we all know why. We know that the global climate problems cause ancillary problems that destroy the lives of many people, environments and so on.
This country is signed up to the target, but there is a lot of work to do yet on persuading other countries, not least the United States of America, to come on board. However, my right hon. Friend the Prime Minister and others have taken on that challenge, and we will continue wherever we are active to ensure that that happens. Rising temperatures and the 60 per cent. CO2 reduction are what this is all about. We must reach the target.
When it is said that research expenditure is too low, I should point out that that is often in comparison with other countries, and that is not to say that there has not been an upward trend. All we are saying is that this issue is like many other areas of life here: things are not happening fast enough to ensure that we reach the targets that we want to reach. Our funding—which often looks fragmented, poorly co-ordinated and lacking in focus—demands real consideration and a drive that will be new to us. The Government are almost touching on that but, from what we saw in our Committee, we are not convinced that the aim will be achieved. We need convincing, and perhaps here this afternoon we will be assured that that will happen.
We agree that research and development expenditure is on an upward trend, but the chief scientific adviser has said that the UK should increase its energy R and D expenditure in line with its nearest EU competitors. The Government conclude by saying only that the trend is upward, but we want to quantify that and to know what will be achieved over the next few years given the problems that we face. I ask my hon. Friend the Minister whether he agrees with the chief scientific adviser and what target he thinks the UK should aim for on R and D expenditure in this area.
Recognising the fragmentation of efforts in the UK, we proposed a renewable energy authority. We wanted to pull together the Government's efforts in developing low-carbon technologies. We wanted them to work with industry to make the renewable energy targets a realistic ambition, rather than just a vague aspiration, which is what we thought we were hearing and what we identified. We reckoned that that authority would assess Britain's strengths and prioritise offshore and marine technologies and nuclear fission and fusion. We recognised that if we did not achieve our renewables targets, fusion and fission would have to be seriously contemplated.
Things can get quite ugly in our Committee. We talked about a White Paper that looked green around the edges. Perhaps in a cruel way, we said that there was a yellow streak in it because the Government would not consider the position of nuclear power. I talked at this morning's meeting run by the Nuclear Industry Association, which was full of eminent people, I know that they need guidance as to where their industry is going. It is not that they are not in favour of renewables and do not identify with the need for them, but they want to know what type of technologies and research they should work on.
Mr. David Drew (Stroud): I am pleased that my hon. Friend was able to attend that meeting, at which I was also present. Will he concede that there is a general problem, not only with the nuclear industry, but with the energy industry as a whole, in attracting people of the right calibre and ensuring that the energy industry
has a sufficient skills base? We do not seem to be too good at that in this country. The nuclear industry is a fairly stark example, but other industries, particularly renewables, surely face the same problem.
Dr. Gibson : I thank my hon. Friend for that intervention; he is absolutely right. Let us consider the position in our universities, where physics departments are closing and young people are not choosing physics and similar subjects. That happens for many reasons, but one is the change that has taken place in the nuclear industry. It used to hire many talented young people who saw it as offering a career path and the excitement of carrying out research and developing technologies in that area. They do not see that now. Probably only 200 or 300 young people are now involved in that industry. What signal do we give if we cannot say definitely where that industry will be in five, 10 or 20 years' time? Will it play a serious part in the development of energy policy?
Mr. David Chaytor (Bury, North): To pursue the point about the relative contribution of nuclear and renewables to the non-carbon future, will my hon. Friend accept that a missing link in his report, excellent though it was, is the assessment of the cost of reducing carbon in the different technologies? It is difficult to assess the research priorities until we know what are the cheapest ways of getting rid of a certain type of carbon.
Dr. Gibson : Again, my hon. Friend is right. The House of Lords Select Committee on Science and Technology recognised that gap, and will examine the matter in detail. I welcome the interaction between the two Houses in considering the problem. Obviously, one cannot do everything—there may be 100 questions, but one can answer only 20 at a time—but we want to know what the targets are, if we can achieve them and what we need to do.
It has been said that there are holes in the recent White Paper, but it has inspired many communities to do things. In a recent meeting in the House, a group from Norwich—where else—called CRed, which stands for the community carbon reduction project, told us what it was doing in East Anglia to pull the community together to recognise these problems and to try to engage everyone at all levels—from schools to Delia Smith keeping the lid on the pan. She has kept a lid on the pan at Norwich City football club for some time, but that is another story. Nevertheless, people throughout the community are becoming engaged in the project. Community politics and the engagement of everyone in all parts of our society are important. The issue is not the responsibility only of Government, but of schools, community groups and individuals. The joined-up thinking that is now emerging from the White Paper is great, and we should try to ensure that others in our communities try to achieve the targets. The Government cannot do that on their own; they need everyone to be engaged.
I said something about the void relating to nuclear power stations, which others will also mention, and about the message that we are sending. We have also been to see nuclear fusion in action. The Government have injected lots of money into that, as they have into
wind and wave power, biomass and biofuels. There is a recognition of the need for tax reductions so that farmers can become involved in the conversion of discarded vegetation into biofuels, thereby protecting the environment.The White Paper has generated a mood of excitement, as has the work of the three Select Committees. We are engaging in detail and urging people to do more and more. This is the time to achieve targets. The world is ready, and we must make it happen. There is no doubt that the nuclear fusion industry in this country is of world class, and Government support for it will pay off. The Japanese look at us with envy. We may envy their photovoltaic industry, but they regard our nuclear fusion industry as spot on.
We know that there are public concerns about nuclear fission and its radioactive waste. It is not at the top of the polls with regard to what people want. However, such attitudes can be turned around with the right development of technologies. We should try to encourage that. We do not want to end up with the lights going off, as they did in California. After all, the last time the lights went off in this country was during the imposition of the three-day week and the miners' strikes. We all know what happened to that industry, thanks to the Conservative party and its many friends. We do not want that to happen again. We now have the technology and the will to ensure that the lights stay on and that industry keeps developing.
Mr. Andrew Robathan (Blaby) rose—
Dr. Gibson : I thought that that might inspire a few comments from the Opposition. They cannot resist it.
Mr. Robathan : The hon. Gentleman is quite right. He is trying to develop a non-carbon economy theory, and I could not agree more with almost everything that he said. However, is he saying that he would like there to be more coal-fired power stations?
Dr. Gibson : No, and I did not know that there were many left. I thought that the Conservative party had closed most of them, and many of us spent a lifetime trying to stop it doing that. However, that is not the subject of the debate, as we well know.
The new energy technologies, renewables obligations, climate change levy and emissions trading schemes are not sufficient and must be developed. Our report argues how they might be developed, with the use of radical carbon and renewable energy taxes, distinguishing between the different technologies at different stages of their development and their carbon status.
The energy White Paper has many admirable features and is inspirational in getting people to react to the issues, but we as a Committee were unconvinced that the targets on reduction of carbon emissions to be met by 2010 and 2020 were backed by sufficient proper investment in research and development at this stage to help to achieve those targets. It is a challenge, but there are people waiting in the wings to join in with new ideas and new technologies.
Our Committee says to the Government that they should let the science and technology do the talking: they should give investment and support to the scientific and technological community in the United Kingdom so that they can produce the results.
3 pm
Mr. John Horam (Orpington): I am delighted to present the three reports with my two colleagues, who on the one hand represented scepticism, which is probably realistic, and on the other enthusiasm, which is probably more true of the scientists. I am also delighted to see the Minister here because I know that he is a genuine enthusiast for the topic. I hope that he survives today's reshuffle, which may be—
Mr. Horam : The cull, or whatever it is, that may be taking place off stage. We need a Minister with enthusiasm for the subject. Incidentally, I have never found out—that may be due to the Minister's skill—which form of energy he is most enthusiastic about, but I accept that he may have to hide his light under a bushel in that respect.
The Minister for Energy and Construction (Mr. Brian Wilson) : I will tell the hon. Gentleman later.
Mr. Horam : That is good to know. It is possible that the Minister may no longer want to hold his job. He may feel that, having produced the White Paper, his job is done and that someone else can take over. However, I remind him that a White Paper is no good unless it is implemented. There are many Liberal Democrats here and I understand that they have a good slogan—"No leaflet is a leaflet unless it is delivered." The same is true of White Papers—no White Paper is a White Paper until it is implemented.
The Environmental Audit Committee produced two recent reports—the more recent of which we are discussing today—covering the sustainable energy strategy, renewables and the performance and innovation unit review. In 1999, we produced an equally interesting report on energy efficiency. The Minister may be aware, following the evidence that he gave to our Committee recently, that before the end of the summer recess we intend to produce a short report giving our reaction to the White Paper, so with regard to energy we will have covered the waterfront as one might say.
The Committee welcomes the positive attitude that the Government have taken towards renewables. However, as they would probably admit, the targets that they have set are very challenging. We pointed out in the report that the 5 per cent. renewables target for this year would be missed. The Government admitted subsequently that that was the case and noted that it might be missed by as much as 2 per cent. There is a 10 per cent. target for 2010, but the renewables obligation imposes an even higher target of 10.4 per cent. by 2010 and the definition of renewables under the renewables obligation is much narrower—it is only 1.5 per cent. at present, as opposed to 2.9 per cent. on the broader definition that we had hitherto considered.
Those targets are huge and if they are to be achieved, there will have to be a massive increase, mainly from wind power. It has been calculated that to achieve that target one or two wind turbines would have to be erected every day between now and 2010—a total of about 6,000 turbines. As a fellow Chairman said, that may be possible engineering-wise but the economics come into the frame, too.
The problem is that the Government are contributing relatively few new resources. An extra £60 million is added to the total spending on renewables, which brings it to £340 million, but that is over a four-year period, so it amounts to about £19 million a year. It compares poorly with the Government's support for nuclear energy in the past decade or so, and unfavourably with what our competitors in countries such as Germany and Japan spend. Although I accept that the amount is a welcome increase, we are in an international market, as the Government say constantly, and we have to accept that other countries make large investments.
The Government will say, understandably, that they have a raft of measures—the new electricity tariff arrangements, the renewables obligation and so on—with which they hope to push energy towards more renewables. That will work to some extent, but we should acknowledge that there are problems in the NETA arrangements, which are different from those in Germany and Japan to encourage renewables. Those countries have the so-called feed-in arrangements whereby the premium payment goes directly to the generator; in the UK it goes to the supplier. Therefore, the supplier, who is in a strong bargaining position, can often negotiate away the premium payment, which in Germany goes directly to the generator, and therefore reduce the incentive for people to invest in the area.
Malcolm Bruce (Gordon): Is not the problem that the existing arrangement pulls through the cheapest, most developed form of renewable energy and does not pull through those that are in development? At present, there is a massive expansion of wind power, but wave and tidal power, for example, are not at a commercial level, and apart from Government grants there is no mechanism for pilot projects to encourage it. That is why the German system would deliver what is wanted.
Mr. Horam : The hon. Gentleman is absolutely right. There is only one premium payment at one level in the UK. We cannot have a band of different payments. Wind power, which is much cheaper than the others—I believe it is 2p per kWh—gets pulled through, whereas biomass, for example, which is about 10p per kWh does not. I am indebted to GLOBE UK for drawing my attention to the fact that
- "after producing electricity for only eight days, the troubled biomass power plant in Eggborough, Yorkshire has been sold for £3 million. The project cost £30 million, £3 million of which was provided by the DTI."
That taxpayers' money has presumably gone down the drain unless someone buys the plant and can make it run economically in another part of the country. That is what happens with biomass as a consequence of not being able to pull through technologies that are in their infancy. Thus, everything goes into wind power and the Government have not yet faced up to that problem.
A third problem is that distributors and arrangements are needed for getting the power into the grid system, which needs large-scale investment that the Government cannot justify under the NETA arrangements.
The problems flow from the fundamental nature of the arrangements that the Government have put in place. It is surprising for a Conservative to argue that they are too market-oriented; not enough allowance is
made for planning. The Government will no doubt argue that the German system would lead to high prices. However, at least one of my fellow Chairmen has argued that the period of very low prices is coming to an end. They were too low and would have risen anyway, and we should consider more carefully the effect on the fuel poor. The Government have an obligation to make arrangements to ensure that the fuel poor do not suffer from an increase in prices. However, we cannot for ever go on doing nothing and worshipping at the altar of cheap power because of the fuel poor and it is up to the Government to cut the Gordian knot. I am sympathetic to the view that there must always be a balance between the social, the environmental and the economic considerations in a sustainable development approach, but it is up to the Government to work it out in a sensible way that does not disadvantage the fuel poor.Finally, I should like to speak briefly on two things, energy efficiency and nuclear power.
Mr. Gareth Thomas (Harrow, West): Before the hon. Gentleman moves on to energy efficiency, may I encourage him to share my view that there is another lesson from the German experience? It concerns planning policy. Germany has adopted a strategy of identifying sites for wind farms, which helps it to overcome at a much earlier stage the initial difficulties that communities inevitably have with them. Are there not lessons there for onshore wind farms in the UK, given that we have seen that kind of strategy for offshore wind?
Mr. Horam : Yes. The hon. Gentleman has hit on the other big issue, the planning problem, of which we are all well aware. Can the Minister tell us the situation regarding reviewing PPG22? How far advanced is the planning guidance to assist renewables? The matter has been pending for some time. What is the Government's position? It is a crucial issue, as the hon. Gentleman indicated.
I do not want to say much about energy efficiency, partly for reasons of time and also because the White Paper made it plain that a further implementation document is to be published within 12 months. It will deal in detail with energy efficiency, which is hugely important, and has hitherto been the Cinderella of energy, and needs that sort of careful attention. Can the Minister tell us how advanced the implementation plan is and when we can expect its publication?
Mr. Chaytor : Before the hon. Gentleman leaves the energy efficiency point, is it not the case that, in dealing with the problem of fuel poverty in a period of rising prices, energy efficiency is the only way of squaring the circle? Secondly, returning to my intervention about the cost of cutting carbon per tonne, is it not the Minister's experience that the cheapest way of cutting carbon is improving energy efficiency?
Mr. Horam : I am not used to such helpful interventions. None the less, I am grateful to the hon. Gentleman, who is a member of the Environmental Audit Committee. I agree. Fuel efficiency is a major part of the way through the problem.
On nuclear power, I am not unsympathetic to some of the Government's decisions about British Energy, which faced real problems, but I have two questions. First, why did they set a deadline for the sale of the American assets? That seems to be foolish in economic terms. Perhaps it was due to European stipulations, but it has led to the equivalent of a fire sale; those assets are bound to attract a lower price—
Mr. Wilson : I will deal with that now. The sale of the Bruce assets resulted in British Energy's borrowing being quickly cancelled, so none of the £650 billion facility is currently taken up. As for AmerGen, we have given some flexibility to British Energy for exactly the reason that the hon. Gentleman states.
Mr. Horam : The Government have changed their position; there is now more flexibility on the sale of the American assets than there used to be. Is that the case?
Mr. Wilson : On AmerGen, yes, precisely, because otherwise it creates far too much of a buyer's market.
Mr. Horam : That is my point; I am glad that the Government have acknowledged it. The other issue is the contract that was signed some time ago between British Energy and British Nuclear Fuels. That contract was disadvantageous to British Energy. Are any negotiations going on about that? It is fundamental to the future of British Energy that that be unwound in a sensible way. I therefore hope that the Minister will stay in his post and unravel those knotty problems in due order.
Mr. Deputy Speaker : Order. Reference has already been made to the three Select Committee reports. It will be difficult to strike a balance across the House and across the three Committees. None the less, I shall do my utmost to see that everybody gets a bite of the cherry. However, I remind the House that it is the customary practice to commence the first of the three winding-up speeches 30 minutes before termination, so if we are to accommodate everyone, whatever we do must be concluded by 5 pm. I therefore ask all right hon. and hon. Members to bear that in mind when making their contribution and when accepting or making interventions. Six hon. Members have given prior notice of their intention to speak, but more than 50 per cent. of the Members here are standing and seeking to intervene anyway. Nevertheless, I shall do my best.
3.15 pm
Sir Robert Smith (West Aberdeenshire and Kincardine): Thank you, Mr. Deputy Speaker. I welcome this debate as another chance to focus on the issues that the three Select Committee reports and the White Paper raised, and to hear how the Minister is getting on in responding to those concerns. In relation to energy matters, I should first draw Members' attention to my entry in the Register of Members' Interests. Under the heading of registrable shareholdings, I have detailed my holding in Shell Transport and Trading and, under overseas visits, I have included a visit to the Offshore Northern Seas exhibition in Stavanger, for which various oil companies and the UK Offshore Operators Association paid.
While launching the UK-Norway co-operation working group report at that offshore exhibition, the Minister kindly let me ask a question from the back of the hall, but afterwards he regretted that he had done so. I start by repeating that question: how far has progress been made on the part of the report that dealt with reinforcing the grid from St. Fergus to allow more Norwegian gas to arrive in the United Kingdom? The working group considered how to achieve that.
I have a strong constituency interest in one aspect of the energy debate, which is to do with the future of oil and gas exploration, its use and our security of supply. Many of my constituents work in the industry and the economy of the north-east of Scotland has benefited greatly from it. The north-east is trying to branch out for the future by using its experience of technology in that industry to build a greater base in the renewables sector. However, there is no more sensible or rational way of ensuring this country's security of supply than by making maximum use of the resources on our doorstep. Before we have to start importing energy, we should ensure that we have made best use of those resources with all technical efficiency. The Government's policy should be aimed at encouraging the greatest investment and activity in our gas and oil industry so that, through maximising the benefits here, we avoid depending on imports later. Not only would there be benefits in terms of our balance of trade, but our own supplies would be the most secure of all sources if there were any concerns. Once locked into the ground and abandoned, those resources cannot be returned to with any efficiency or effectiveness.
We have reached a key stage in the North sea, as we noted in the report that referred to the Department of Trade and Industry. The need to encourage and to work closely with the industry has been recognised. Under the Minister, the Department has worked closely with the industry. The taskforce and the pilot that have resulted have been most welcome. The partnership that the Government have achieved by bringing together the various sectors of the industry and trying to develop an overview to increase efficiency and to exchange views on the best way of maximising the UK's potential is much appreciated. However, as we all know, in the last Budget—which took place not long after our report came out—the Chancellor was not perceived to be on the same wavelength as us. He produced a period of uncertainty and a hiatus by changing the tax system in a way that surprised many in the industry.
A year has now passed, and I detect a mending of fences at a senior level. It has been welcomed that, in this Budget, the Chancellor sought to address some of the issues to do with the tariffs on pipelines that were raised by us in opposition last year to try to create a better, more level playing field. I also welcome the fact that he has been working with the industry to examine ways to encourage greater exploration. Those of us who represent constituencies such as those in north-east Scotland meet not just those in senior management but people at a medium level of management who work on databases in the industry. There is still a feeling that considerable damage was done by the way in which the Chancellor introduced the tax as a surprise to the industry and by the way in which it was handled.
The uncertainty that built into people's planning for projects and so on has caused considerable damage and concern to investment. A lot of work will be needed to
undo that uncertainty. People at a senior level have decided to try to work with the Government, but at the medium level of management there is still much uncertainty and worry about what has happened to the industry.One change in the industry is that many smaller players are investing in the sector, and the Chancellor is having to work with the industry to see how his incentives for exploration can apply to the new investors. I hope that something productive comes out of the Treasury's engagement. Today's Treasury questions did not give much hope that those on the Treasury Front Bench greatly understand where the process is at and what is happening. We are reaching the end of Committee stage on the Finance Bill, so the chances of something coming out on Report are slim.
There is a worry about the pace at which the Treasury moves. Last year's Budget produced a shock, and the problems were raised by members of the Opposition on Second Reading and in the Committee considering last year's Finance Bill. Many of the issues relating to the taxing and tariffs on pipelines were raised, but it was not until a year later that the Treasury was able to address the issue. The pace at which it responds to concerns could be improved.
What we learned in Norway also relates to our security of supply, as the Norwegians are looking for more markets for their gas. Quite rightly, the Minister is concerned not to be the Minister responsible if gas supplies run out in the United Kingdom. However, there is a concern that if we do not make the best use of the infrastructure on our side of the North sea, we will lose out in our negotiations with the Norwegians. There is redundant capacity in many of our pipelines in the North sea. The Norwegians are keen to pressurise the Government to sign up to treaties that will allow them to control new pipelines that come all the way to our coastline and bypass the spare capacity in the North sea. We urge the Minister to recognise that he has some leverage: the Norwegians need a market as much as we need their gas. We urge him to make sure that there is a level playing field in any negotiations and that the market is not distorted in any way. Reassurances would be helpful.
Mr. Wilson : Will the hon. Gentleman acknowledge that the reasons for the treaty negotiations taking much longer than some people might have expected is because those points were contested with such vigour and in such detail? I hope that he and other hon. Members will not criticise the delay in the treaty, because to do so would be to say that we should come to an agreement come what may. For the reasons that he gives and for many others, it is more important to get it right.
Sir Robert Smith : That was a reassuring intervention. In fact, I had planned to say that I hoped the fact that the scare stories that a deal was to be signed in Shetland a few weeks back and the fact that it never materialised were a sign that those on this side of the negotiations were taking the tough line being asked of them.
I want to touch on some other issues in the debate. Fuel poverty was mentioned and I want to reinforce the argument that energy efficiency must be the ultimate way of unlocking the problem of fuel poverty. If we can
tackle the energy efficiency of our housing stock, when people's personal financial circumstances change, they will not fall into fuel poverty because they will already live in efficient houses.If we tackle the energy efficiency of people's housing stock and they move, they may take on a house in which the operating costs will be more expensive. If we can tackle the problem of housing stock, we shall also tackle demand across the country and help to reinforce our Kyoto agreements.
Mr. Simon Thomas : We also need to consider the fact that energy is more expensive for the poorest people. Those who have bank accounts can set up direct debits. As a result, they may pay for more than they use in the summer, but they can spread their payments over the year. They will then pay at the cheapest tariff. Those who have pre-payment meters pay at the highest rate. We need to consider social issues such as how to enable the poorest to get the cheapest fuel.
Sir Robert Smith : Maximising access to the best deals and ensuring that debt blocking does not prevent people from moving to a cheaper supplier but allows them to transfer their debt to a new supplier are important.
That brings me to two final issues. One is regulation and the vital role of the regulator. The Government are now giving the regulator signals that have steered him in a direction that will allow environmental considerations to become more important. It is also important that the regulator should realise that, every time an investigation is carried out, it creates burdens and imposes costs on industry even if he decides not to alter the regime. The regulator should think carefully before launching into further investigations. For instance, the gas balancing investigation seemed to take two or three years, but the regulator eventually accepted the status quo. Better communication would result in less cost, and people would not have to work out what to do about the regulator.
The Chairman of the Science and Technology Committee mentioned his views on the colours of the White Paper. I considered intervening on him because, in reply to the Trade and Industry Committee's recommendation that there be no further delay in Government decision making on nuclear energy and that
- "the Government should make a clear statement on the future of nuclear energy as quickly as possible",
- "This issue will be addressed in the forthcoming White Paper."
The Government's indecision has sent the signal that, if we are to have a non-carbon future, it will have to be done through the renewables sector. The Government's decision not to make a decision on nuclear energy has sent the signal that the new challenge lies with renewables.
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Mr. Tony McWalter (Hemel Hempstead): In the time available, I shall concentrate on what I regard as the core issues. I shall focus on the disagreement between
the Minister and the Science and Technology Committee, of which I am a member, on the role of markets, particularly the Committee's suggestion that the White Paper has a yellow streak.The Government's view of energy generation suggests a picture in which the United Kingdom's present capacity for 80 GW is likened to a Roman chariot race, with each horse tugging a gigawatt or half a gigawatt. The Government seem desperately frightened that, as time goes by, some of the horses will expire, which will lead to the total capacity of the system being lower. If someone says, "Here's a new horse. It might carry a bit"—particularly if it is a thoroughbred, non-carbon horse—it seems that the Government would welcome it to the race.
In that context, the Science and Technology Committee believes that we need something larger than horses. My knowledge of the world of dinosaurs is not good, so using one might give the wrong impression, but elephants might do. We need a huge animal, one that can take a significant part of the load that will be lost as a result of some of the carboniferous horses no longer being welcomed to the race. Secondly, as someone who is opposed to nuclear power, my view is that we should also retire some of those horses, despite the fact that they carry a significant part of the generating capacity.
One must ask whether the Government have put a sensible strategy in place. The Government say that markets will drive matters forward. I believe that they are wrong. The Government have set some very good targets, but, as the Select Committee on Trade and Industry pointed out on page 41 of its report—which deals with combined heat and power units—the Government have got the target right, but have no strategy for achieving it. Whatever the generating capacity needs to be in 2020 or 2050, whether it is 80 GW or, through some magical conservation, only 60 GW, or 100 GW or 1,000 GW, we must have something other than a market system in place to generate that capacity.
People have mentioned wind farms. That is all very well, but the contribution to that massive figure that winds farms can make is quite small. In addition, the technology comes from abroad. We wish to see the creation of a non-carbon, non-nuclear capacity involving an industry that would meet the domestic need, and that would provide us with world-leading technology that would enable us to sell that knowledge and capacity to other countries.
Malcolm Bruce : The hon. Gentleman has made an important point. Wind technology was originally British technology, but because it was not developed in the way that the Select Committee on Science and Technology would like, that technology went elsewhere. We are at the point where we could become world leaders in other technologies, but the existing mechanism is guaranteed to ensure that Britain misses out again, unless we change our approach.
Mr. McWalter : The hon. Gentleman is absolutely right. If I may pursue my horse analogy further, the Government put rather lighter saddles on some of the renewables horses, but they are still not equipped to run around the course effectively, so the demand for the product from those chariots is much less than it is from
those of the older technologies. We are not saying that we want only one method of power generation. We are conscious that wave and tidal power is an enormously risky technology to back; it is unproven, and studies were dropped at a time when we could have gained a world lead. However, it is vital that the Government revisit that as a technology that gives us the best chance of achieving the economic and generation aims that we have been discussing. That is particularly helpful to us because, unlike Japan, which has a steep continental shelf, and which cannot dream of introducing that kind of technology, our continental shelf, and the wave and tidal movements that result from it, has a raw energy capacity that could, if harnessed properly, be productive.
Sir Robert Smith : I wish to reinforce for those outside the Chamber the benefits of tidal energy. It is totally predictable—as long as the moon continues to move around the Earth.
Mr. McWalter : I am grateful to the hon. Gentleman. The Select Committee on Science and Technology has said that the Government should pick a winner. However, in picking the winner of wave and tidal energy, we are throwing all the other horses out of the race. That is what the Government's response, on page 8 of their submission, seems to say. Effectively, they say that it would not be a good idea to concentrate their expenditure on technologies that are regarded as winning low-carbon options.
We are saying not that we should back only one horse, but that we should leave all the other horses in the race. However, we must ensure that at least one option has a burden to bear and is given the fortification to bear that burden and generate a significant amount of resources by appropriately using this country's expertise, geography and topology. We are saying that the Government should not necessarily back a winner, but should make a huge investment. Just before a previous Secretary of State resigned, he seemed to be willing to do just that. As is the way with Government reshuffles, he had no sooner said the words than he had gone.
On page 51 of the Select Committee on Trade and Industry report, it says that it agrees with the Government that we should not pick winners. I hope that the result of this debate will be that the Trade and Industry Committee comes on board with the Science and Technology Committee to agree the common cause that it is vital for Britain's economic future and non-carbon generating capacity for there to be something other than the let-the-market-decide approach. If we manage to agree something like that, this country might be able to meet the demand for electricity, even though many of the horses currently running will have fallen.
There are early-day motions to say that we agree with the Government's targets. That is fantastic—I want to see zero carbon emissions—but the problem with targets is that if we do not have a mechanism to achieve them, the lights go out and the country seizes up. If that happens, it does nobody any good at all.
We need to select a technology that will deliver a significant amount of our capacity. I want it to be non-nuclear and non-carboniferous and to be developed in accordance with our technological and scientific
expertise, traditions and capacities. Considering that, the field narrows, but we need the Government to say that they will act. The necessary investment can be compared to planning to put a millennium dome on the continental shelf—I use the analogy advisedly—and a serious pilot project would cost a similar amount of money to the original dome, about £750 million. So when the Government say that they are putting £15 million into this and £12 million into that, they are not addressing the fact that we need a massive project that has the capacity to prove or, sadly, disprove one technology, once and for all.If we can do that, and the technology works, we will begin to see an energy future that is increasingly less dependent on carbon, advisedly phasing out nuclear fission capacity and all of the problems of a nuclear legacy, and generating for us the power that we need to keep a modern economy going throughout this century.
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Paddy Tipping (Sherwood): As I am not a member of any of the Select Committees whose papers we are considering today, I am grateful to take part in the debate. I am keen to focus on the White Paper and the PIU report that came before it. I was struck by the Prime Minister's introduction to the White Paper, which he called
- "a milestone in energy policy."
It is, indeed, a milestone, and it introduces major changes. We are to move quickly to a vision of the low-carbon economy, with carbon dioxide emissions to fall by 60 per cent. by 2050. That change is to be driven by the rapid rise in renewables. We are also to move from being a net exporter to a net importer of energy. Significantly, as other hon. Members have said, energy prices are now to go up, after a period in which they went down.
The Government and the Minister are very brave to produce such a White Paper, which looks 20 or 50 years ahead. Putting their strategy, or vision, down on paper gives people in the industry an opportunity to criticise what they have done and to ask whether the targets will be achieved. In that respect, it is interesting that the White Paper itself says that the proposed
- "scenario will need to be updated in the light of experience."
The situation is therefore still flexible.
It is important to recognise that this is the only White Paper that we have. We might wish for another one but, as my hon. Friend the Member for Norwich, North (Dr. Gibson) said, people in the industry know that they have to get behind the White Paper to make the vision a reality. However, I have some doubts about whether that will happen.
The Select Committee reports are complimentary about the White Paper, but they are also critical and challenging at times, so let us start with some simple criticisms. The White Paper does not even do some of the easy things. Combined heat and power has been of great concern to the Minister, and we have not met our targets. However, the White Paper does not make clear how we are to do that.
I am also interested in the issue of coal mine methane, in which the Minister has also been involved. It is a real pollutant, and we could make major environmental
changes if we could capture it and generate electricity from it. The industry is on its knees and is moving abroad, but the White Paper simply says, "This is a hard issue. We'll come back to it." We need more clarity about the way forward.There has already been a discussion in the Chamber about the place of coal. Environmental concerns will kill the coal industry unless we can generate electricity more cleanly and more effectively from coal. I am worried that we spend less on clean-coal research than Japan, which does not have an indigenous coal industry. People are critical of the Bush Administration, but United States spending on clean-coal technology is enormous. Richard Budge's plant at Hatfield gives us an opportunity to study burning coal more effectively, more efficiently and in a more environmentally friendly way. However, the market will not take these proposals forward by itself, and we need to consider mechanisms to ensure that we move from research to a demonstration plant at Hatfield.
Another aspect of the White Paper that hon. Members have mentioned is the growth in renewables. We must achieve 10 per cent. by 2010, and the aspiration is that we achieve 20 per cent. by 2020. I agree with my hon. Friend the Member for Ochil (Mr. O'Neill) that we shall not get there by 2010, but we should strive to do so. I am concerned that we have still only achieved less than 3 per cent., much of which is made up of traditional hydro. Unless we move quickly towards wind development and particularly offshore development, we shall face difficulties. My hon. Friend the Member for Harrow, West (Mr. Thomas) rightly said that the matter needs to be considered across Government. We must take into account the planning issues that affect wind power and we must ensure that we have a more effective way of delivering it. It is still the case that three out of every four wind power applications do not see the light of day. That is a poor success rate.
The problem with wind power and other renewables is that they are variable and peripheral. One of our tasks is to move our energy industry, which has traditionally been coal and steel based, to the edges of the country. That means rewiring Britain, which will involve tremendous costs. In addition, we need back-up for wind power and storage mechanisms. My hon. Friend the Member for Ochil spoke about the need to store gas. If the White Paper is to succeed, we need an enormous investment in infrastructure. I am not confident that those issues are addressed in the White Paper.
If the renewables industry struggles, as I suspect that it will, we will become even more reliant upon gas. I am not a great advocate of security of supply, but I feel that the White Paper is complacent when it comes to gas. By 2020, 70 per cent. of electricity could be produced from gas, 90 per cent. of which would be imported. I know that the Prime Minister has remarkable diplomatic skills, but one of the lessons of the Gulf war is that one cannot negotiate one's way through everything. I would be very concerned if we were to become that dependent on gas. Diversity of supply will increasingly be an issue,
and we will be forced to reconsider coal as a flexible way of generating electricity, and to return to the question of nuclear in four or five years.
Mr. Simon Thomas : Mainly on the point of gas, but a little on coal, has the hon. Gentleman seen a report called "20:20 vision" from a one-day conference of the Scientific Alliance on the future of energy policy in the UK, and the presentations made there, particularly by Dr. Roger Bentley? I think that the hon. Member for Ochil (Mr. O'Neill) was there. Dr. Bentley said that the policy that we consider should be based on the presumption that after 2015 the amount of hydrocarbons that we are able to extract effectively and cost effectively will start to decline. That is another reason to encourage diversity.
Paddy Tipping : I would be pleased to have the benefit of 20:20 vision and the ability to see that far into the future. The essential point is that we need diversity of supply. That has been the cornerstone of our energy policy for many years and we should stick with it. Energy prices will not stay low forever. In environmental and sustainability terms, it is right that they should go up. However, as my hon. Friend the Member for Ochil and others have said, we have not yet thought through the social and economic consequences of that. We must do that if energy prices are to rise.
I take the point that other hon. Members have made that energy conservation is extremely important. Let me be blunt. I do not understand the host of energy conservation measures that already exist—there is a wide range of schemes. One of the things that the White Paper indicates is that we must, as a matter of urgency, review energy conservation and have a simpler regime. It is a straightforward equation: we want to make savings and we need to put Government money into it. The simple way to measure the payback is to see by how much we reduce energy use and how much energy we save. We need to work very hard on that.
These are big challenges for the White Paper, but the real challenge is simply this: over the past 10 years, we have relied on the market to deliver on our energy needs and energy policy. The White Paper represents a partial step change from that, because it advocates a new framework and some new structures and directions. Those are things that only the Government can intervene on and produce; we cannot rely on the market to do that. We need to go for a third way, as they say, on energy policy whereby the market operates within the energy framework set out by the Government. However, the fabric of government works against that. It has been said this afternoon that a variety of Departments are involved, which often compete with one another and have competing priorities.
The most difficult thing about the energy White Paper is the delivery mechanism. Do we really believe that an energy policy can be implemented by a sustainable energy policy network and the creation of a sustainable energy policy advisory board, both reporting to the ministerial group chaired jointly by the Secretaries of State at the Department of Trade and Industry and the Department for Environment, Food and Rural Affairs? I do not believe that that is a possibility.
My analysis is that the White Paper is big on vision, and we should back that vision. The direction is generally right, but the practicalities, and most
particularly the delivery mechanism, will, I am afraid, prove inadequate. As the White Paper itself says, this is a scenario that we will have to revisit. I strongly believe that we will move away from an energy policy that is primarily driven by renewables to a much more traditional approach under which coal, gas, renewables and nuclear all play a part. That is a sensible British tradition, and the way forward.3.52 pm
Mr. Simon Thomas (Ceredigion): I am pleased to have an opportunity to contribute to the debate as a member of the Environmental Audit Committee. I begin by placing on the record my appreciation of a colleague who died this week. Dr. Phil Williams, a Welsh Assembly Member for Plaid Cymru, died on Tuesday night. He was a professor of astrophysics at the university of Wales in Aberystwyth in my constituency and did more than anyone in Wales to put renewable energy on the political agenda. Ten years ago, he proposed targets for renewable energy for Wales that are now the official targets of the National Assembly for Wales. It is unfortunate that he has died at a young age—he was in his early 60s—having only just retired from the Assembly. I hope that hon. Members will join me in sending commiserations to his family. More than anyone, Dr. Williams sought to underline Wales's role in the wider scientific community and the contribution that Welsh scientists and science in Wales make to the debate. He will be sorely missed.
As a Member of Parliament, I, too, want a low-carbon future. I am not quite sure about a zero-carbon future because as a carbon-based life form, I like to have a few emissions. Not all of them contribute too much to the greenhouse environment. We need to be able to do that—[Interruption.] I hope never to be taken over by the green goo or whatever it is called. I am convinced that we have a future as carbon-based life forms together with the other carbon-based life forms on the planet and that we, as the primary species affecting the climate, must make certain key decisions now to ensure that by 2050 we are not having the same impact on the climate and climate change as we seem to be having at the moment.
One of the great things that has happened in the past three years is that the debate has moved forward significantly. When I first came to Parliament three years ago, people were still seriously saying in the press, the other media and Parliament that climate change was not happening, or that if it was, it was due to glacial fluctuations or something that had nothing to do with our output of carbon. I understand that that argument is still put forward in places such as America, but on the whole it has been defeated in this country. The body politic in this country, together with the best scientific advice, now agrees on that point at least. The White Paper incorporates the commitment to a 60 per cent. reduction by 2050, which I very much welcome. The White Paper's key achievement is that it has drawn a line under that debate and allows us to move on. On the basis of debates such as this, we must now decide what are the best technologies to make available to achieve that aim.
The Environmental Audit Committee's criticisms, which the Chairman outlined to some extent, relate to the lack of targets that clearly take us to 2050. We have
agreed, at least in this debate, that energy efficiency is one of the key tools that we must use to achieve the reduction of 60 per cent. However, we know that the White Paper contains no hard targets for energy efficiency. When the Minister came before the Committee, he and his advisers disagreed about whether the figures in the White Paper were targets. We are still not clear about that. The Cabinet Office produced some targets, challenges, or whatever the Government like to call them these days, including a 20 per cent. improvement by 2010 and another 20 per cent. improvement by 2020. I hope that those will be incorporated in Government policy and that we will work towards them.Targets for renewables are also missing from the White Paper or are not sufficiently far reaching. The Committee had a real target for 2010, which it believed would not be achieved because of the current rate of growth in renewables. We are already going to miss that first target, but our aspiration is to double it for 2020. If we are not certain that we have the right tool kit for reaching that first target, the aspiration for 2020 becomes even weaker.
Perhaps even more worrying is the Minister's assertion on the day on which the White Paper was published that renewables and energy efficiency have five years to prove themselves. He knows that I take renewables and energy efficiency very seriously and that I want the Government to achieve their targets. His assertion is unfair on those sectors. After seeing nuclear energy commit suicide and then digging up the body, we can give more hope to energy efficiency and renewables. Let us not wait for five years until they have proved themselves. Let us work with them to ensure that they prove themselves, because they may be our only real option for a low-carbon future. If there are other options, the White Paper does not say what they might be.
Mr. Wilson : I am not complaining, but I am being slightly misrepresented. I was saying that we will have a much clearer idea of what carbon reduction renewables and energy efficiency will deliver by about 2008. There will have to be a reassessment then. I never undermined the objective. I believe that there should be maximum support, which I hope that we are giving, to both those pillars of our policy. If they deliver what we hope of them by 2008, no one will cheer louder than I will.
Mr. Thomas : I certainly accept the Minister's words. I do not doubt his enthusiasm for the subject in any way. However, those targets and assistance for energy efficiency and renewables need to be clearer. It is not only renewables and energy efficiency that must prove their worth; the Government must prove theirs by creating the right circumstances for those sectors to flourish. The Environmental Audit Committee believes that they could contribute hugely to these tasks and targets and said so in its report, which the Chairman mentioned. We want the Government to respond to that with a little more enthusiasm and clarity.
I mentioned, in an intervention that the hon. Member for Ochil (Mr. O'Neill) did not receive very well, the road map produced by the Renewable Power Association. We should welcome that if it helps a section of the industry to do as well as the Government want them to do, and perhaps a little better.
Two things must happen to assist renewables to take off. The lack of a planning framework and guidelines, which have been promised for some time, has already been mentioned. Planning is dealt with differently in Wales and Scotland and the story from Wales is disappointing. The hon. Member for Sherwood (Paddy Tipping) mentioned the lack of planning applications that were going through. It is hugely disappointing that in Wales there has been only one major application in the past few years and that got through only because the Department of Trade and Industry took the decision, not the National Assembly for Wales. It would still be at the Assembly if it had been up to them. Strong devolutionist as I am, I am glad that the application went through. One must be pragmatic about such things. The story from Scotland, where there is a more pro-active understanding of renewables, is rather different. There is already a good hydro sector and wind power has taken off.
There will not be 6,000 more turbines by 2010 because the planning process will not let it happen and neither will local people. Anyone who has a wind farm in their constituency knows how people campaign against them. That is disappointing, but it happens. Our strategy for renewables must go wider than wind power, including offshore wind—I am pleased that the north Wales offshore wind farm is going ahead—and include investment in new technologies.
Photovoltaics have a great role to play and I was interested in the comments about tidal and wave energy. We are told that renewables are intermittent and therefore we cannot rely on them, but tidal and wave energy are not intermittent; we can rely on them, as we can predict the tides. It would be useful to invest in that sector although it is not yet ready to bring to market.
Dr. Alan Whitehead (Southampton, Test): Does the hon. Gentleman accept that we need a variety of renewables that relate to the rural and urban environments? On planning permission, the issue is that much of the renewables load is being placed on rural areas. Conversely, urban renewable technology, such as photovoltaics, or near-renewable technology, such as combined heat and power, appear to be disadvantaged and yet have the urban dimension that could make substantial progress in distributing the renewables load throughout the country.
Mr. Thomas : I very much agree with the hon. Gentleman. The alternative is to invest hugely in infrastructure to take the wind energy from west Wales, which has a low population, to Birmingham, for example, which has a very high population. The hon. Gentleman mentioned some valuable alternatives. Why cannot we ensure that every new house is built with a PV source of energy? We could take that step now and it would make a significant contribution.
I welcome the announcement that the Export Credits Guarantee Department is to have a £50 million renewables fund. The Environmental Audit Committee is undertaking an investigation into the ECGD and its officials appeared before us a couple of weeks ago. I was disappointed to hear that so far there have been only
three applications to the renewables fund, as United Kingdom technology on renewables could be exported—supported by the ECGD. Whether it is PV in South Africa, wind energy and so on, I hope that the Minister will encourage the Department to be more proactive and ensure that the fund is used and has a beneficial effect on UK industry.I will mention fossil fuel because coal still produces 36 per cent. of our energy and that will continue for some time to come. I am an Aberdare boy from the south Wales valleys and coal mining is in my family. I speak with sentiment about the subject, as well as with hard pragmatism. I would like assistance to be given to help the coal industry meet the challenge of a low-carbon future. Many of the coal plants are too old, not efficient enough, and lacking sulphur scrubbers. EU rules will make it difficult for some of those plants to continue to operate. That industry needs to rise to the challenge and may need assistance from the Government to do so. Another aspect of coal burning is whether carbon sequestration can be a genuine technological option within 10 or 15 years. That would allow us to use—at least for the next 50 years or so—the mix of energy that the hon. Member for Sherwood advocated.
Transport is a crucial issue that has not been mentioned so far in the debate. It is dealt with in the White Paper, but not in detail. Transport emissions are an increasing problem. If one looks at the graphs, one can see that it is an aspect that is decoupled from GDP. Those emissions are going up exponentially. The Government must deal with that.
We must ensure that there is better support for the biofuel sector. That would also support our farmers because many biofuels can be grown in many parts of the UK, for example rapeseed. Any modern diesel car can use at least 15 per cent. biofuel with no problems. The biofuel sector needs support. The Treasury has announced a 20p cut in the duty for biodiesel. The sector says that it needs a larger cut. Let us examine that and work with the industry.
Another important aspect of transport is the rapid growth of the aviation sector and the effect that aviation emissions will have on the ambitions that the Government have set out in the White Paper. The growth of airports and air travel will have a serious long-term effect on a low-carbon policy. Air travel also has wider environmental effects. That is a huge political issue and it is a hot potato in many areas of the UK, particularly the south-east of England, which is most affected. The Environmental Audit Committee is carrying out an investigation into aviation policy and its effect on the environment. I hope that its report will be useful to the Government.
We must take a lead in getting an international agreement on the cost of aviation fuel. That is the most obvious and effective target, rather than passenger taxes. The Deputy Prime Minister once told me that he would take a lead role on that matter for the Government. That was two years ago and nothing has happened. It is no excuse to say that we are bound by international conventions from the 1930s. We know that, but those conventions are surely ripe for examination and renegotiation in light of the huge challenge that the growth of the aviation sector poses to the aims of the White Paper.
I very much hope that the Government will respond to the useful and helpful criticisms that people have made today. This is a debate for people who take a real interest in these matters. It is a debate for people who have particular views that they wish to get across to the Minister. We are fortunate to have—for today at least—a Minister who is enthusiastic and receptive to those views. If one thing emerges from the debate, I hope that it will be a set of policies that will allow us to put together a proper road map. It is one thing to map out the mountains and ravines—the Cabinet Office report did that, as did the performance and innovation unit report. We expected the White Paper to offer more certainty on energy policy. I hope that the Minister will offer that clarity.
4.8 pm
Dr. Desmond Turner (Brighton, Kemptown): First and foremost, an important new development in the White Paper is that, for the first time, the Government have accepted as a major political driver the need to reduce carbon dioxide emissions by 60 per cent. That should from now on be the main driving factor in energy policy. It rates more highly for Britain than either security of supply or producing energy as cheaply as possible. If we do not achieve a 60 per cent. reduction, in 50 years the more extreme climate change scenarios will occur and our successors will curse us for not having chosen the right policy now.
This debate may be only for the benefit of a few anoraks gathered together on a Thursday afternoon on a one-line Whip—[Interruption.] Yes, but it is one of the most important aspects of policy that could be discussed in Parliament. As a country, a depressingly small percentage of our energy is produced from renewable sources—the percentage is far lower than that of Denmark or Germany. How did we reach that position? It is worth reminding ourselves of the lessons of the recent history of energy policy, starting with the Thatcher years, during which it started to go seriously wrong.
In these islands, we have always been uniquely energy rich compared with almost any other country and, consequently, we have been profligate with energy. Thatcherite energy policy was entirely profligate and threw away the lead that we had in renewable energy—in wave and wind power. Wind power was taken up by Denmark, Norway and Germany and we are desperately running to try to get back into the game now that they have a 20-year start on us. Nuclear power was never commercially viable and was developed to the extent that it was for only military reasons. It has never been able to justify itself in a commercial market. That is why British Energy has found itself in such an awful fix.
Mr. McWalter : My hon. Friend said that his principal target is the huge reduction in carboniferous energy production. Since nuclear power is not carbon engendering, will he not in the end give us the Japanese recipe—they intend to fill the gap by building 13 nuclear power stations, even though at current rates that is not economic?
Dr. Turner : My hon. Friend could not be more wrong—that is the last thing that I would do. I am saying that we should fill the gap with truly sustainable
renewables and I do not regard nuclear power—certainly not nuclear fission power—as a sustainable option. Nuclear fusion is another question.
Mr. O'Neill : I am sorry that I missed my hon. Friend's opening remarks, but I think that I have understood enough of what he said to raise this matter. Has he read one of the background research papers to the White Paper, which was produced by the Makkall Group Ltd.—[Interruption.] With respect, I thought that that was the case. That report suggests that we will be able to secure the low level of carbon that my hon. Friend wants without the use of nuclear power, but that to do so would be at disproportionate cost. Energy prices would be something like 260 per cent. more than we would pay if we had a 40 per cent. nuclear contribution. I am not necessarily advocating a nuclear contribution of that level, but I believe it to be significant that that information is not available in an easily accessible footnote in the White Paper, although it is included in one of the papers adjoining it.
Dr. Turner : I thank my hon. Friend for that interesting intervention. I confess that I have not read the paper to which he refers, but I certainly disagree with its conclusions. There is no way that the substitution of renewables for nuclear or other power sources could carry the sort of financial penalty that he suggests, unless their generations costs were two and a half times higher than current commercial generation costs. I am satisfied that that is not the case for wind power. I am satisfied also that that will not be anywhere near the case for wave and tidal power; indeed, when they are fully exploited, generation costs will be little different from current commercial levels. I completely disagree with that paper's conclusions.
Twenty years later, we shall be in a different situation. We shall have the CO2 imperative, but we shall still be highly energy rich. Although fossil fuels will not be available at the same ridiculously low price as now, we will have offshore the raw energy to supply the country with at least twice the amount of electrical energy that we consume now. I speak of offshore wind, wave and tide power. For me, the future lies offshore. We have a unique strength compared with the rest of the world. Other countries will be able to benefit to a large degree from our industry's exporting the machinery.
Mr. Wilson : I bow to nobody, not even the hon. Gentleman, in my support for wave and tidal power, but I am faced with the uncomfortable fact that, after 20 or 30 years of research and development, I know of only one commercially operating wave power station. It is on the island of Islay and it does not produce much energy. My question is genuine: despite those 20 or 30 years of R and D, how can a leap be assumed from that infant industry that will allow us to dismiss other established forms of generation? How can we assume that the gap will be filled?
Dr. Turner : I thank my hon. Friend for that intervention. He will remember that wave energy research and development was a casualty at the beginning of the Thatcherite years. At the point when wave development was approaching commercial viability under Professor Salter, it was stopped.
[Interruption.] We could spend all afternoon debating the question. That development was resurrected only recently under this Government. Only two or three years ago, the Department of Trade and Industry completely dismissed the idea that offshore technologies were of any significance and it was putting no money in that direction. The Minister is nodding in agreement. Those were 20 wasted years. We cannot blame the technology for that. We are starting late, but we can catch up rapidly. We can learn much from the wind power industry and we should be able to truncate that development.
Mr. Robathan : The hon. Gentleman's speech seems rather partisan. However, I would like to correct his maths. Mrs. Thatcher was Prime Minister for only 11 years, but he accused her of wasting 20. It may have been too long for the hon. Gentleman, but she certainly was not in power for 20 years.
Dr. Turner : The right hon. Lady was succeeded by others who were just as good at wasting. Those were 20 wasted years.
I think that we all agree with the aspirations expressed in the White Paper. The Science and Technology Committee differs with it on willing the means. I hope that the Minister will not take the differences personally, as they are meant as constructive criticisms. After all, the White Paper is the work of a committee of several Departments and, like all such documents, it has some features of the proverbial camel.
We have a number of serious criticisms, the first of which is that even though the situation has improved, as my hon. Friend the Member for Norwich, North (Dr. Gibson) was careful to say, we are still spending far less as a Government on research into and the development and deployment of renewable energy than any of our competitors. We are just about matching Finland, which has a much smaller population, and are spending less than the Netherlands, which has only 10 per cent. of our population. We spend one eighth of the French budget, one quarter of Italian investment, one sixtieth of what the Japanese are spending and about one fortieth of what the Americans are investing. It is clearly not good to get into such a big race without sufficient financial capacity, but our Committee sets out a policy framework that can provide the finance without raiding the Treasury's coffers, so we might even be able to get it past Gordon.
Our second criticism is that the present structures and responsibilities involved in the energy business are diffuse. There are several research councils, and although we are glad of the future establishment of the United Kingdom energy research centre and the national energy research network, they do not yet exist. Other bodies—the Energy Saving Trust, the Carbon Trust, the Department of Trade and Industry, the Department for Environment, Food and Rural Affairs, the Forestry Commission—are all committing a bit out of their small pots towards energy research, but none is giving enough.
One concrete example illustrates several points that I want to make. I had an interesting conversation today with a professor from Imperial college, who was our
Committee's adviser on our first report on tidal power. He has a spin-off company that develops tidal power machines, one of which has operated successfully in the water for a year within 3 per cent. of expectation. He has twice been refused funding by the Engineering and Physical Sciences Research Council and the DTI, but he has now signed a contract with the city of San Francisco. By 2004, he will install a 1 MW plant to be followed within 18 months by a 10 MW plant. In other words, his work is getting commercial.The costs for that initial commercial demonstration are just about the same as wind power, so heaven knows what the costs will be like when a 100 MW plant is installed. That demonstrates the problem that was raised earlier about the possibility of our losing the technology abroad because it is not being supported here. It also shows that the pace of development does not have to be as slow as is commonly assumed and that it is nowhere near as expensive as is commonly assumed.
Mr. McWalter : Given the Government's response that they spent an estimated £11 million in 2002–03 on low and non-carbon energy technologies, how long does my hon. Friend think it will be before a fully operational, productive, commercial wave and tidal capacity is available in Britain?
Dr. Turner : That is a very difficult question to answer, as I am sure that my hon. Friend knows. However, I would say that such a capacity would be possible in five years, or 10 years at the absolute maximum, provided that there is sufficient focus, investment and energy.
The White Paper suggests that the Government are happy with the market pull of renewables, but I think that it is far too weak. The renewables obligation is just about strong enough to get conventional power companies to consider investing in offshore wind projects. However, no one will touch anything further down the technological development road, apart from the small to medium-sized enterprises that are trying to get projects off the ground.
The Committee thinks that there is a serious policy vacuum in the White Paper and we want it filled. We therefore proposed that Parliament should pass a renewable energy Act to give the issue political impetus and to introduce specific provisions. The first of those would be a renewable energy authority, which would have UK-wide responsibility for co-ordinating and promoting research and development and, above all, the deployment of renewable energy. It would not just be another new body, to be set alongside existing bodies. Rather, it would bring them into one co-ordinated body. I must, therefore, disagree with the Government's response to our suggestion. They say:
- "The proposed renewable energy authority risks diverting effort into the creation of structures and possibly new silos separate from the main stream of energy policy rather than into the delivery of programmes and commitments."
That could not be more wrong, because our proposal is intended to do precisely the reverse—it would make things happen and happen much more effectively.
The Committee also proposes a unified carbon and renewable energy tax. There are many fiscal measures, which we want to bring together into one clearly identifiable tax. Such a tax would penalise CO2-
producing energy production and use the money raised to finance the energy authority's efforts to promote non-CO2-emitting generation technologies. It is a very straightforward proposal and the arrangements would be self-financing. Indeed, it would be financed from within the power industry, so Gordon would not have to find another penny.The Committee wants there to be a statutory requirement on grid and supply companies to connect renewables, as there is in Germany. We also want to revise Ofgem's terms of reference to enhance the importance that they give to the environment. I was happy to learn last night that a new chairman has been appointed to Ofgem, and I have every confidence in his abilities. He is a constituent, and I know him well. I think that the Minister will get along nicely with him and that Ofgem will cease to be an obstacle to progress and become a help. I congratulate the Minister on an excellent appointment.
Finally, the Committee wants a statutory requirement on supply companies to provide net metering, so that the embedded sources of generation about which my hon. Friend the Member for Southampton, Test (Dr. Whitehead) is concerned can be properly catered for.
All those proposals provide a framework that can deliver the aspirations set out in the White Paper. I have taken a few interventions and have spoken for far longer than I intended, so I shall stop now. To sum up, I implore my hon. Friend the Minister—assuming that he is still the Minister with responsibility for energy tomorrow, which I hope he is—to take another look at the policy and take on board our recommendations. Together, we can find a formula that will really make things happen.
Mr. Deputy Speaker : Order. It may interest the House to learn that due to the hot air in here this afternoon I have asked for blowers to be turned on. The effects should be felt relatively quickly.
4.29 pm
Malcolm Bruce (Gordon): Thank you, Mr. Deputy Speaker. I know that you have taken an enormous interest in this debate, so I am sorry that we have generated so much hot air. I wholly agree with the thrust of almost every contribution and the belief that we not only should but could make renewables the basis of our energy future. However, that will not be achieved on the basis of the current policies.
Energy efficiency and co-generation are crucial parts of delivering carbon reductions. For many years, I have been an honorary vice-president of the Combined Heat and Power Association. The Minister, my hon. Friend the Member for Hazel Grove (Mr. Stunell) and I were at the Paper Federation of Great Britain dinner last night, at which the industry expressed its total despair that, as the pioneer of combined heat and power in this country, it is providing nothing whatever to the grid and, consequently, losing money on its investment to boot.
A couple of months ago, I was at a dinner of the Combined Heat and Power Association. However much the hon. Member for Ochil (Mr. O'Neill) deplores trade associations, it was quite the most depressing dinner of any trade association that I have attended in my 20 years
in the House. We heard a catalogue of total disasters. For example, National Power regarded its capital investment in CHP as of no value and had written it all off. Some £3 billion of committed investment has been indefinitely cancelled or scrapped, and many hundreds, if not thousands of jobs have been lost in what ought to be an industry that deals in one of the most important technologies with which the Government can deliver their targets.One cannot listen to such news and then sit back and say, "Oh dear." One clearly must do something more. One suggestion has been that there should be a combined heat and power obligation, which the Government have rejected. There are perhaps good reasons for that. My argument is not that the Government should be told, "No, you must do that," but that they should be asked, "Well, if you're not going to do that, what are we going to do to make this happen?"
I take note of the point that the hon. Member for Brighton, Kemptown (Dr. Turner) made about the new chairman of Ofgem and the hope that that appointment will create a different climate. However, we may return to the situation whereby the chairman must operate within legislation that may still constrain him. We shall have to see about that.
However, we must find a way forward. Much of the debate is about how to find credible mechanisms with which the external costs to the environment can be internalised. It is interesting to see the agreement about objectives and targets between the Trade and Industry Committee and the Science and Technology Committee, but an apparent disagreement on how to achieve those targets. I do not want to go down the route of sustained subsidies from the taxpayer. There is a proper role for taxpayer's money for seedcorn project support, although I agree that a lot of that is relatively small. We need a market that pulls through new technologies and actively makes them happen.
The current renewables obligation gives an advantage to the cheapest technology in the field, but it does nothing to stimulate diversity or the introduction of new technologies unless they become competitive quickly. What usually happens is that the constraints on that technology—planning problems, and so on—are such that it turns out not to be as viable as it first appeared.
One wind farm in my constituency has full planning permission and approval, but construction work has not started because it was negotiated under the previous regime and the contract is no longer viable. As yet, those involved have not been able to renegotiate the contract to take advantage of the current prices. That absurdity should be addressed. Two other applications in my constituency have been extremely contentious. I have refused to back the objectors because I support wind technology, but I have been willing to meet them. I have engaged with them and acted on their behalf to try to obtain answers to their objections, but I have not been prepared to side with them. The question that the objectors put to me is simple, "We're a rural community. Some of us don't like the look of wind turbines. What's in it for us?" The answer to that question is absolutely nothing.
No member of Plaid Cymru is here at present, so I can be more relaxed, but I do not wish to be nationalistic. Scotland has taken it upon itself to set a target of 40 per
cent. renewable energy by 2020, because of our already established hydro power and our potential—as we see it—for wind, tidal and wave power. I commend that. My colleague Ross Finnie, the Minister responsible for this issue in the Scottish Executive, has taken a bold step and the Executive have supported him. The same question applies across Scotland: this is fine and it will help the UK if we deliver it, but what is in it for Scotland?In many areas, the answer is some jobs and some spin-off, but they are relatively minor. We need to find a mechanism for ensuring a direct feedback to the communities supporting the industry. I noticed that the hon. Member for Western Isles (Mr. MacDonald) has said something to that effect. He has a major application in his constituency. Indeed, I tabled a couple of early-day motions towards the end of last year—which several hon. Members signed—calling for two things: first, indicative planning guidelines to try to identify where development was appropriate and inappropriate to take some of the heat out of the proliferation of applications; and, secondly, some mechanism for the community to have a stake and a share in the economic benefit.
That does not mean that people who do not like these projects will not object, but many other people may take a more objective decision if they can see a direct community financial benefit and can decide whether the environmental impact is acceptable, given the contribution that such projects make to the overall benefit of a low-carbon economy. I hope that the Government will actively regard such ideas as constructive and helpful mechanisms.
The Minister is not here, and I shall not question why he is running in and out of the Chamber. Anyone who looks at the history of what I have said in the 20 years I have been in the House and before will know that—not for all my life, but for most of my political life—I have been opposed to nuclear power. That is not because I object to the technology, but because I have been completely convinced that it is simply non-viable. It has been the cuckoo in the nest of Britain's energy industry. It has siphoned massive resources that have been denied to other energy options.
I remember being involved with Professor Salter's ducks. He was extremely frustrated and angry because he believed that he had got a project to the point where it might have been viable even though other technologies might come along and supersede it. However, all the grants for promoting projects in renewable energy were administered by the Atomic Energy Authority. It was a remarkable coincidence that, each time a renewable project looked as if it was getting somewhere near viability, the money was withdrawn or further money was withheld. It is impossible not to see a connection, particularly when the nuclear industry was getting 100 times as much money and not delivering the results.
We must accept that a free market will not deliver if the environmental costs are not included in the market. The market has no responsibility for them. Unless one can internalise them, the market will not only not deliver, but it will positively obstruct the objective. Therefore, we either have to bring the costs into the market or provide a framework. The Germans'
argument is that one pays to pull through the technology one wants. One uses the market, but implements an override to ensure that it delivers.Doing that involves risks as one is backing or encouraging projects or technologies that ultimately may not succeed. However, as long as one has a reasonable spread and a consistent view, the chances are that, across the piece, one will have enough of the success that one wants and one will be able to accommodate a degree of failure. The end result will be a balanced range of energy options that meet environmental objectives and that are broadly accountable to the market.
Consumers of energy—that is all of us—ultimately have to pay for the impact that we are making on the environment. The myth of the expression "the polluter pays" is that it makes the voter to whom we are all appealing feel comfortable that somebody else is paying. However, we are all polluters and we are all paying. If, as has been acknowledged, the consequence is that the price of electricity goes up to meet environmental objectives, we will all pay for it but we will do so willingly because the benefits are justified and without their removing the pressures of genuine commercial competition and the disciplines of the market.
We have discussed wave power, and I have visited the project in Islay, which is being used to generate Greenpeace's green bus on the island. It is an electric bus that powers itself from the wave-generating source, so it is possible to say that there is a zero-carbon bus on a remote Scottish island. However, I do not think that Ken Livingstone will find that it will solve the problems in London yet.