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COMMITTEES
Mr. Deputy Speaker (Sir Alan Haselhurst): With permission, I shall put motions 5 and 6 together.
Select Committee on Broadcasting
- That Mr. George Galloway be discharged from the Select Committee on Broadcasting and Mr. Geoffrey Clifton-Brown be added to the Committee.
European Scrutiny Committee
- That Mr. Allan Rogers be discharged from the European Scrutiny Committee and Mr. Bill Rammell be added to the Committee.--[Mr. Keith Bradley.]
PETITIONS
Basic State Pension
1.26 am
Mr. Tom Levitt (High Peak): I rise to present a petition bearing the signatures of 1,600 members and supporters of the Glossop, Hadfield and District Pensioners Association, who declare that pensioners in the Glossop and Hadfield area of High Peak are dissatisfied with the 75p rise in the basic state pension.
- The petitioners therefore request that the House do address the basic level of state pension as soon as possible and in future restore the link between the basic pension and the annual rise in earnings.
BSE Incinerator
1.27 am
Mr. Colin Pickthall (West Lancashire): I rise to present a petition collected by Councillor Cynthia Derek and Mrs. Sandra Rocker, comprising 2,000 signatures of the citizens of Burscough in West Lancashire, which states:
- That the citizens of the area entirely and utterly oppose the proposed BSE Incinerator which private interests wish to open on Burscough Industrial Estate, in that it is a totally inappropriate position; would pose threats to the health of the local population; would severely damage the horticultural industry in the vicinity and would put at risk other firms on the Industrial Estate, particularly those engaged in the food industry.
Wherefore your Petitioners pray that your honourable House do request the Secretary of State for DETR to ensure that the proposal is subjected to normal local planning procedures and that the ambiguity in the Planning Guidance covering Incinerators be amended and corrected to protect citizens all over the U.K.
And your Petitioners, as in duty bound, will ever pray . . .
Combined Heat and Power
Motion made, and Question proposed, That this House do now adjourn.--[Mrs. McGuire.]
1.28 am
Mr. Gareth R. Thomas (Harrow, West): Even at this time of night, it is a great pleasure to speak about combined heat and power, which has been called the Cinderella of energy policy because its many environmental, economic and social benefits have not been fully recognised. Recently, that has changed and CHP is at the core of the UK's drive to attain diverse, secure and sustainable energy.
Combined heat and power enables the supply of electricity and heat, usually in the form of steam, from a single fuel source at high conversion efficiencies--typically 70 to 80 per cent. Demand is met by CHP at a lower level of fuel consumption, generating significantly lower carbon dioxide emissions. CHP can also be linked to community heating. A network of heating pipes can supply homes, businesses and a wide range of other consumers. CHP is essentially about energy efficiency. Conventional power stations are typically 34 per cent. efficient. The much-talked about gas-fired combined cycle gas turbine power stations are, according to the Department of Trade and Industry, on average just 48 per cent. efficient. Only when CHP plant is brought into play do we get efficiencies of more than 70 per cent.--and up to 80 per cent. with some small-scale CHP schemes.
In the past few days, the royal commission on environmental pollution has published a detailed and thorough analysis of what we need to do if we are to be serious about tackling climate change. It calls for reductions of up to 60 per cent. in UK carbon emissions and sets out a series of scenarios for achieving that. It says that we need a new way of looking at energy policy--one that does not focus just on electricity production, but recognises and develops the market for heat. In that context, the royal commission has emphasised that CHP is a technology of which we need to make much wider use.
Many global corporations increasingly recognise, too, that their future lies in part with combined heat and power. It is significant that a major global energy player, ABB, should announce just two weeks ago that it was reinventing itself by divesting itself of more conventional power-generating technologies and that, in future, it would focus on knowledge-driven products. For ABB, that includes wind power, micro-turbines and, in the context of this debate, combined heat and power. Other global companies like ABB, such as BP Amoco, are already at the fore of developing their CHP capacity. I am sure that more big energy players will now follow the global market leaders.
Indeed, in the UK, CHP is at work at more than 1,300 sites, including the Palace of Westminster, throughout Whitehall and at Kodak in my borough where many of my constituents work. Kodak has its own 70 MW combined heat and power plant. Like other major industrial sites that have switched on to CHP, its scheme saves it money directly and helps the site compete effectively by reducing a core business cost. I gather that, in the constituency of my hon. Friend the Minister, both Sunderland general hospital and the Crowtree leisure centre have put combined heat and power schemes to work.
I am delighted to say that the Labour party has had a long-standing commitment to CHP. In our manifesto, we said that we would be
- committed to an energy policy designed to promote cleaner, more efficient use and production, including a new and strong drive to develop . . . combined heat and power.
Each new CHP scheme produces its own set of benefits, with distinct rewards for the businesses with the foresight to commit to CHP. One particular example is Kemsley Mill, a major UK paper producer, where PowerGen CHP has installed and financed an 80 MW CHP scheme. Some £4.5 million per annum of energy savings have been achieved, with a reduction in primary energy use of 31 per cent. Carbon dioxide emissions have been reduced by 320 kilotonnes per annum, sulphur oxide emissions have been eliminated and nitrogen oxide emissions reduced by 92 per cent. That has improved local air quality, and traffic movements have been reduced and noise levels have come down significantly.
CHP also offers us considerable opportunity for our social exclusion agenda. St. Pancras Housing is one of more than 60 residential CHP schemes that the Combined Heat and Power Association has helped to develop. The St. Pancras scheme, at this pioneering housing association's head office next to Euston station, has cut the energy bills of 100 tenants by 20 per cent. Three years ago, it was able to get rid of standing charges, and the metering system that it uses puts to shame the ones that many of us have at home. I urge my hon. Friend the Minister to ensure that, in the work of the Government's ministerial group on fuel poverty, the real benefit of CHP and community heating is not overlooked and is reinforced.
Crucially, CHP also benefits the environment. The CHP industry has cut UK carbon emissions by over 9 million tonnes in the past 10 years. Every gigawatt of CHP that is put to work cuts UK carbon emissions by some 1,000 tonnes, making it one of the most cost-effective ways of making those cuts; hence the royal commission's strong support for CHP in its report. The Government believe that over half of all industrial carbon savings could be delivered by the wider use of CHP.
CHP also helps us to build a competitive economy. In the right circumstances, local generation is a key way of improving business performance by reducing costs. It does that by removing the need for costly long-distance transmission of power and by being highly efficient in the process. The challenge, surely, is to ensure that we have a regulatory framework that continues to deliver and enhance those rewards. I was pleased to hear that my right hon. Friend the Minister for Energy and Competitiveness in Europe confirmed that the Office of Gas and Electricity
Markets will focus on that in its new environmental action plan. I hope that Ministers will now concentrate on monitoring Ofgem's implementation of that action plan.A practical example of that exists at BP Energy, which has worked with English China Clays at its Marsh Mills and Par Harbour sites in the south-west and put CHP to work, delivering energy savings of some £972,000 per annum.
CHP also holds out the prospect of vital new investment and extra jobs. The UK CHP industry has invested over £1 billion in helping the UK to improve its business performance through the better use of combined heat and power. Achieving our new CHP target will, in turn, stimulate some £3 billion of new private sector investment.
Energy for Sustainable Development, a leading EU energy consultancy, suggested in a recent report that if we can achieve just two thirds of our CHP target by 2010, there could be an estimated 34,000 new jobs in the CHP sector.
Local councils also have a crucial role to play in the development of CHP, and I welcome the specific support that the Government have already given to the development of new CHP schemes in Southampton, Manchester and Tower Hamlets, all of which have developed effective partnerships with the private sector. Manchester city council and the London borough of Tower Hamlets have private finance initiative pathfinder schemes, which have secured the support needed from the Department of the Environment, Transport and the Regions to attract significant private sector investment.
The scheme that London Electricity has developed for the Barkantine estate in Tower Hamlets will, I hope, help to demonstrate how CHP can assist in harnessing the private sector to tackle the challenge of social exclusion that blights all too many inner-city communities. I hope that the Government will take forward and recognise that potential in their work on fuel poverty.
Despite that, only a small part of the potential for CHP is being exploited. The energy technology support unit has suggested that there is the economic potential almost to quadruple the use of CHP in the UK. Figures from the Building Research Establishment suggest that 1 million homes could be connected to CHP by 2010. BG Technology estimates that, in the long term, between 4 million and 6 million houses would be suitable for domestic CHP.
Why are we under-achieving on that potential? Uncertainty in the market is making investment decisions difficult. Talk of electricity prices falling by between 10 and 30 per cent. in the next couple of years and predictions of medium-term gas prices rising by almost as much add to the uncertainty of the impact of the new electricity trading arrangements. Inevitably, customers want to wait and see what happens.
Essentially, the market arrangements that Ofgem is busily building seem to focus largely on those with the capacity to trade large volumes of power in new computer-based energy markets. The trading screen seems to be replacing the reality of a power station. Smaller players do not have the capacity for year-round, 24-hour trading arrangements. As the Director General of Ofgem has outlined to the Combined Heat and Power Association, more work needs to be done to enable the small players sensibly to band together and trade. That
problem has been reinforced by the sheer costs for small players of getting involved and representing their position effectively. I hope that the Minister will urge his colleagues in the Department of Trade and Industry seriously to consider the issue of market inequality among the players in the industry.CHP is about long-term decisions; the short-termism of today's energy market is therefore a key issue which the Government will need to consider in their forthcoming CHP strategy. All arms of the Government, too, need to make sure that they are consistent in their view of the industry's potential. There is concern that we do not have the measures in place to achieve the Government's new 10 GW target. I understand that the DTI's energy projections appear to be based on an assumption that the 10 GW CHP target will not be met. I also understand that that view was echoed in a recent address to the Society of British Gas Industries.
The Government's climate change consultation paper also appears to place a less firm emphasis on CHP than the DETR's previous consultation document, despite strong support for CHP in the responses. I hope that my hon. Friend the Minister and his colleagues will remain resolute in their commitment to the CHP target and give the industry the confidence it needs to invest by making sure that their message is consistent. Some further concerted and cross-cutting departmental action is needed.
In his pre-Budget statement to the House last November, my right hon. Friend the Chancellor announced that CHP would be exempt from the new climate change levy. That was widely welcomed, but it now seems that Customs and Excise is determined to put up the price of CHP power by putting the levy on power exports from CHP schemes. That seems entirely illogical in environmental terms and will significantly distort inter-company competition as some companies will get power levy-free when they use it themselves. Those that buy it in across the grid system from a CHP plant will have to pay the levy. I urge the Government to do what the Chancellor said last November and just exempt CHP from the levy. That is essential to counter the current market conditions--in particular, gas prices are rising--and the potential impact of the new electricity trading arrangements.
The excellent Utilities Bill, which is going through Parliament, will set the market framework for at least the next 10 years. In particular, the new energy efficiency standard of performance provisions are most welcome. I hope that my hon. Friend the Minister can confirm that they will give Ministers the power, should they choose to use it, to introduce arrangements for CHP similar to those planned for renewables. We also need to ensure that the Government have the powers to take a lead on embedded generation. The royal commission specifically said:
- Embedded generation represents a major strategic challenge for the National Grid Co plc, both technically and financially as well as for the distribution companies. We did not see any signs that the company has yet appreciated the scale of the challenge or begun to take the steps needed to place itself in a position to respond to it . . .
I also hope that the Government will reinforce their drive for CHP in their planning consents regime for larger power plant to encourage power station developments,
but not just to take the easy option and build less efficient electricity-only power plant. We need to encourage companies to seek out customers for heat--or, indeed, for cooling--and in doing so move beyond purely short-term rewards to achieve the best environmental impact possible from the fuels that they use.Focusing on CHP presents the Government with a real opportunity to create the conditions for a sustainable and competitive energy market and to lead the world in the drive for an entirely different energy agenda that brings together the benefits of liberalisation and the challenge of environmental change.
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