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Mr. Deputy Speaker: Order.

4.49 pm

Richard Ottaway (Croydon, South): The hon. Member for Brighton, Kemptown (Dr. Turner) speaks with great authority. Indeed, so catastrophic was the picture that he painted that I will certainly take him up on his required reading.

I declare an interest as a consultant to AEP Energy Services, as set out in the register.

I welcome the debate, which is long overdue and necessary. The most notable feature of the performance and innovation unit report was the lukewarm commitment to keeping the nuclear option open without any serious proposals on why—or, indeed, how—that should happen. I am pleased that the Minister did nothing to diminish that commitment today. I suspect that he is a supporter of the nuclear option in any case, but he is right to keep it open and to allow the debate and the consultation process to reach a conclusion.

Some seven years ago, when the last nuclear power station came onstream, the Government were in an enviable position—there was an abundance of supply and plenty of capacity. But the world has moved on since then. Clouds have loomed on the horizon: Californian power failures; oil price hikes and associated fuel protests; the collapse of wholesale electricity prices; dwindling North sea gas supplies; and, as has just been amply demonstrated, growing political pressure to address the issue of climate change. That affects our views on the future of nuclear power and the nuclear option.

We all share the aims and objectives of reducing carbon emissions, although I think that the Government will have some difficulty in meeting their target of a 10 per cent. reduction by 2010. It is right to try, but, as the Minister will appreciate, it is a very big job, even with the assistance of nuclear power. As nuclear power will start to be phased out after 2010, and will be totally removed from the energy mix by 2035, the task will be even greater. The probable decline in the use of coal—at least, dirty coal—will make the situation more difficult. There

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are no easy options, but in my judgment nuclear power has to replace the dwindling reliance on fossil fuels. It gives diversity and security to the energy mix, and is a reliable low-carbon source of energy. We all assume that gas will take its place, but, as other hon. Members hinted, there are inherent dangers in placing an excessive reliance on gas and on reducing the energy mix. The Government should employ whatever options are necessary to support the nuclear industry and to provide a stable regulatory framework for the nuclear sector.

We have to reach a decision on waste disposal. There have been countless consultation processes, and it is time to make up our minds. Until we do so, it will be hard to make decisions on new nuclear plant. We have to make those decisions, otherwise we cannot achieve our low carbon targets.

I welcome the Government's commitment to renewable energy. Barely a day goes by without a Minister announcing another initiative or a subsidy for this project or that piece of research. That is just the sort of role that the Government should be playing, and I congratulate them. Although they will have difficulty in hitting their targets, it will not be down to any lack of energy and effort on the part of the Minister.

I want to discuss a factor that has been hampering the development of green power. In the past, the Minister has welcomed the use of co-firing to meet renewable energy requirements. In layman's language, that is a mix of, say, 90 per cent. coal and 10 per cent. biomass, which produces 100 per cent. electricity with 90 per cent. carbon production. It is therefore a good process, as it reduces carbon output. The problem is that the Environment Agency has less enthusiasm for co-firing than has the Department of Trade and Industry. Its policy is far from being developed—in fact, it is still working on it—and producers trying to embark upon co-firing are having difficulty in persuading the agency to give them its full support. The problem is not insurmountable—it is a question of joined-up government. The Department and the agency need to get together to improve their liaison on that important matter.

The PIU report centres on security of supply. The word "security" can be loosely defined, and in this context it has many definitions, including stable prices, availability of a good energy mix, and physical security of supply.

It is a given that gas will be the central feature of our drive for a low carbon energy sector. However, North sea gas supplies are dwindling, and we will be a net importer by 2006. As more than half the world's gas supplies are based in Russia, it is essential that we build up a good long-term working relationship with that country. We must develop long-term commercial contracts and work with the Russians as partners. Their pipeline system is old and their own demand is growing, and it is essential to get right alongside them to produce security of supply.

European market liberalisation—a matter touched on by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale)—is the area where most problems exist. The PIU report makes it clear that the liberalisation of European Union gas and electricity markets is essential to safeguard national security of supply. That puts the future in doubt, as the one thing that we do not have is EU market liberalisation. The distortions are manifestly obvious to all who study the EU market. The UK cannot be looked at in isolation—it must

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be regarded as 20 per cent. of the EU market. One cannot draw up a plan for 20 per cent. of the market and ignore the rest. Unexpectedly, the Government seem to be going down that road by acquiescing in EU developments. The Barcelona summit was a failure in that respect, and a comprehensive proposal from the European Parliament was largely ignored. The French made a concession on their domestic market, but not in the business sector. How is it possible to have a genuine market if British generators cannot sell into the French retail markets, but EDF is allow to sell into the British market? We need a level playing field with a symmetrical market structure.

It is a matter of growing concern that the whole EU energy market is slowly falling into the hands of three players—EDF, which already owns a substantial part of the UK market, and the two German companies, RWE and Eon, which are currently buying Innogy and Powergen. The issue is not that those events are taking place in the UK, but that they cannot take place in France or Germany. At every opportunity, those players are buying up all the available assets in the European electricity sector, and within a few years they will control more than 50 per cent. of the European market. That is a totally unacceptable state of affairs, and I am astonished that the Government do not seem to realise the impact of what is happening. We have been through the pain of breaking up the market in this country into small fragments, which has produced genuine competition. To put it back into the hands of three major players that do not have the British interest at heart is to take a dangerous road.

At the root of the problem is a failure of EU competition policy. As far as I can see, the PIU report makes no reference to competition policy whatsoever, yet it is emerging as the most critical aspect of the European energy market. The difficulty is that transnational mergers and acquisitions in the European market are distorting the market as a result of the revenue rules that prevent competition policies from intervening. EU competition law must be revised or a special set of rules must be introduced for the electricity market; otherwise, we will have a completely distorted market dominated by powerful players with little interest in this country. The Government should press for divestment of assets in Germany and France and market-driven access to transmission capacity. That can be achieved only by unbundling the transmission and transportation companies from the supply companies, as was demonstrated and implemented in the UK.

Generators are having a difficult enough time as it is. Wholesale, not retail, energy prices in this country are at a rock-bottom low. That is a result of the NETA rules introduced by Ofgem, which has made it clear that its priority is to reduce prices regardless of the consequences. The sale of electricity in this country is a nakedly open market that reduces prices to the lowest level, and the NETA rules are having an impact. Several power stations have closed down and several generators are in serious financial difficulties. Consequently, the banks will close power stations and maintenance schedules will slip, resulting in brown-outs such as those that happened in California.

I can see that my time is running out. I welcome the report and what the Minister is trying to do, and I look forward to his White Paper.

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4.59 pm

Mr. Tam Dalyell (Linlithgow): Unashamedly and unambiguously, I say that I would like to see three new nuclear power stations authorised, probably at Sizewell, Hunterston and Hinkley. Of course, the difficulty is the waste issue, as outlined by the hon. Member for Hazel Grove (Mr. Stunell). Therefore, I wish to press the question asked of the Minister by my hon. Friend the Member for South Thanet (Dr. Ladyman), which was also mentioned by the right hon. Member for Fylde (Mr. Jack), about the Finnish situation.

In Britain, we should all take note of the remarkable developments in nuclear energy in Finland, including the progress made in the storage and disposal of spent fuel and radioactive waste—for example, at the Olkiluoto plant.

Some 15 years ago, the Finns built a surface store to keep lifetime spent fuel safely for 50 years and 10 years ago they built a deep underground repository, sized to dispose of all the low and medium level waste products from lifetime operation. They have also selected the site for the ultimate disposal of all Finland's spent nuclear fuel and have parliamentary and local community support for it. People may wish to claim that no community in Britain would act like the Finns, but I think that people would do so in the area of Caithness and Dounreay, where they are familiar with the nuclear industry.

The Finns have reviewed their future energy needs and they have decided to build a new nuclear power station, for which they have got parliamentary and public support. Clearly the Finns have moved on from debate to implementation. They are demonstrating that solutions to the issues do exist. In the light of such progress elsewhere, why are we in Britain making such slow progress in dealing with the waste and the possibility of replacing our existing nuclear stations?

The House of Commons has shown this afternoon that it is more pro-nuclear power than I ever remember before. Members may think that they have to fill 10 minutes, but I would be content if the Minister would address the Finnish situation when he winds up. He may have to visit many other places, but he should buy a ticket to Helsinki and see what they are doing there.

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