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Adam Price (East Carmarthen and Dinefwr): I congratulate the Government on at least resurrecting the notion of having an energy policy; the previous Administration largely left it to the vicissitudes of the marketplace. I also welcome the fact that the Government are taking a long-term approach to energy trends and are seeking to combine economic and environmental objectives. Having said that, I take issue with some parts of the energy review, although I realise that it is meant as a platform for debate. Following the lead of the hon. Member for Doncaster, North (Mr. Hughes), I will focus principally on the role that the coal industry could play in meeting the Government's objectives of security, diversity and sustainability.
The energy review is a little complacent about the risks of disruption to energy supplies, as hon. Members explained. It observes that the UK will be heavily reliant on gas imports, but does not regard that as too much of a problem. It notes that the gas grid can be disrupted by disabling a relatively small number of key pointslanding pointsand that the effects could be dramatic. The review largely ignores the risks, however, and it seems that it was written before 11 September. As the report notes, coal is at much less risk of such disruption.
In general, the report highlights the importance of diversity as a means of ensuring security, but it is silent on how that should be achieved. We have heard from several hon. Members about the consequences of falling gas reserves in the UK. Over the past eight years, the remaining lifetime of our gas reserves has fallen by 19 years, so we are obviously using them much faster than they are being replenished. As a consequence, we are increasingly reliant on gas imports. It is estimated that Gazprom in Russia and the Iranian national oil company control almost half of the global gas reserves. The knowledge that the future custodians of our energy security are a company allegedly run by the Russian mafia and another run by Islamic fundamentalists does not inspire much confidence in anyone.
The UK is at the end of a very long pipeline that passes through many countries, which means that we are subject to the highest transportation costs and the greatest risk of supply interruption. The right hon. Member for Fylde (Mr. Jack) mentioned the Californian blackout. The report recognises the significance of that experience and the need for incentives for investment to prevent the same thing from happening here. However, although it says that the UK should learn from that mistake, it is silent about what should be the consequences for policy options.
Coal clearly offers long-term security and diversity of supply at an affordable cost, and the report acknowledges that. Coal reserves in the UK are far greater than those of gas and oil. At the current usage rate, we have at least 50 years of reserves. Coal is a defensive fuel in terms of security of supply because it is plentiful, it is cheap and it is available from a variety of sources. UK producers of deep-mine coal are able to compete on the world market if current subsidies are taken into account. The cost of coal production in the UK compares very favourably with that of other EU producers.
We have heard about the prospects for investment in clean-coal technology, which will enable us to replace the current, ageing coal-fired stations with far more efficient and environmentally friendly capacity, while sustaining
Ensuring diversity and security of supply means that we must protect the indigenous coal industry. One of the worrying factors over the past few years has been the increasing competition caused by coal imports. Imports of steam coal rose from 8 million tonnes in 1996 to over 14 million tonnes just four years later. The Minister talked about keeping the options open with the nuclear industry, but if we are to keep the options open for the domestic coal industry we must take a long-term view. If the remaining deep-mine pits close, those assets will be permanently sterilised. The coal industry faces high set-up costs and relatively low marginal costs, and if supply exceeds demand, investment will be affected in the short term, so we need to look to the long term.
Finally, I should mention my constituency and the specialist coal produced there, anthracite, which is not widely available on world markets. The anthracite industry is important to the domestic heating market in a number of specialist applications. The only alternative sources of anthracite are China and Vietnam, which present particular problems with security of supply.
I have some sympathy with the Minister, who is continually bombarded by various sectional interests, some of which we have heard in the debate. He should be lauded for taking an open-minded and balanced view of the potential role of the various sources of energy. I was grateful to hear his reply to the intervention from the hon. Member for Doncaster, North about the hypothetical six-month gap, which we hope will be closed shortly. I look forward to welcoming the Minister on his visit to Betws colliery, and I hope that there will shortly be an announcement from the Government about continued support for the coal industry.
Mr. Michael Clapham (Barnsley, West and Penistone): I, too, welcome the debate. It is important that the House should have the opportunity of putting its view on the record before the Minister reaches his conclusions in reply to the PIU report. The contribution of my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) showed us clearly why we must develop an energy policy that is considerate of the environment.
I shall develop three points. First, any balanced energy policy takes account of the environment. I support the coal option rather than the nuclear option, and I believe that the coal option addresses the environment argument. Secondly, there is a great danger of UK over-dependence on gas. Thirdly, the coal industry can make its contribution to the UK economy. It can be a competitive and sustainable industry, provided that we get a coal-aid scheme that deals with the investment aspect. I was encouraged by the Minister's comments. From the negotiations in which he has taken part in Brussels, it seems that we will get an aid package that focuses on
On the environment, it is clear that, as other hon. Members have said, there needs to be a fall in CO 2 emissions. We must meet our Kyoto and other international obligations. However, it is worth pointing out to the House that between 1990 and 1994, there was a fall of 18.5 per cent. in carbon emissions in the UK. That was the result of the massive colliery closure programme and the cut in some of the coal generating plant. In a bizarre way, it shows that mining communities have already made their contribution to the environment argument.
There are at present four coal-burning power stations fitted with flue gas desulphurisation, and I understand that another six stations are likely to be equipped with FGD. That short to medium-term option gives us the opportunity to address the long-term issue. Over the next 10 to 20 years, we will require more than 10 GW of replacement for nuclear stations and coal stations. We need to concentrate on clean coal technology to replace those stations.
My hon. Friend the Member for Doncaster, North (Mr. Hughes) referred to IGCC as the technology that should be replacing coal-fired stations. He is correct. The Minister should aim high and that means going for the best that is available. He should consider the current support for clean-coal technology and how we might improve it. The current level of assistance for research and development is £17 million over five years, but that is insufficient. We should consider how we can improve the assistance that we give to clean-coal technology. I believe that IGCC, the gasification way, is the way to the future.
The PIU report refers to an increase of about 20 per cent. in the use of renewables by 2020. We must take that route, but at the same time, we should take into account the fact that renewables are not the whole answer. They are costly, which means that we will need a cheaper supply of electricity to subsidise their development. Again, the energy source that could be used to subsidise investment in renewables is clean-coal technology. I refer the Minister to the International Energy Agency, which recently said that the one option that would reduce CO 2 was gasification. It referred to IGCC technology rather than renewables. Indeed, it added that the use of such technology would reduce CO 2 faster than investment in renewables. I hope that he will consider that aspect.
My second point relates to gas and the increasing over-dependency on it. In 1990, no gas was burned off in power stations, but today, a third of our electricity is generated by gas. The decision made in 1989 to allow gas to be used in power stations was wrong, but it is a matter of history and we must now deal with the consequences. Three years ago, the gas interconnector allowed suppliers to push their gas down into Europe, chasing the higher
I refer the Minister to the cost of the pipeline from Russia to the European national grid, which will be of the scale of 35 billion euros. I understand that the trans-European network will take another 26 billion euros of investment. In comparison, the infrastructure for transporting coal to our power stations is already in place. World coal production is now in excess of 4.5 billion tonnesand that comes from secure sources of production. We should start seriously to consider investing more in clean coal technology, because the source for supplying our electricity is there, safe and secure.
I want to make one point about the gas network. I understand that Coalpro commissioned a study by a military expert and has made the report available to the Government. It shows that the detonation of a bomb placed in the UK network could disrupt about half our gas supply. We must bear it in mind that the supply of gas is vulnerable to terrorist attack.
The coal industry contributes about £1 billion to the economy annually. It is small compared with its previous size, but it is a large national and regional player. In Yorkshire, it contributes about £400 million per annum to the regional economy. Mining machinery manufacturers contribute about £35 million. There has been investment in the industry and we have high-tech collieries. However, we need an investment package of aid that will include certain features. One of the main features should be the inclusion of the Coal Authority