Energy Supply

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Dr. Ladyman: I am probably the kind of pro-nuclear freak to whom the Minister has just referred and I make no apologies for it. He said that decisions about building nuclear capacity had been made on economic grounds. Will he confirm that the economics of energy supply are the way that they are because the nuclear industry alone is forced to internalise the entire environmental costs of its operation, including the cost of decommissioning? Does he agree that an energy strategy for the European Union should apply that good practice to every form of energy production, so that we have a level playing field when deciding on the economics of energy production?

The Chairman: Order. Before the Minister replies, I have allowed the debate to continue about the nuclear industry, but if hon. Members look at the motion before them they will see that it does not specifically mention it. We are bordering on the edges of the motion.

Dr. Ladyman: On a point of order, Mr. Olner. I hear what you are saying, but the reports to which the motion refers focus strongly on issues such as the nuclear energy industry.

The Chairman: The document before us mentions the ``internal market'' and

    ``common rules for . . . electricity and natural gas''.

The motion borders on the edges of the nuclear issue.

Mr. Wilson: I am fairly bordering on the edges now, because I do not want to pre-empt anything in the PIU report.

The terms of the responsibilities borne by the companies are as set out at the time of privatisation. Those who invested in the nuclear industry at that time knew what they were taking on, so I am not prepared to shed too many tears in that direction. Everyone is in favour of level playing fields in principle, but as soon as people begin to argue for a particular player, they are prepared to make exceptions here and there. In Scotland, in particular, there are those who argue that the nuclear industry is subsidised because of its contracts with the electricity industry. Others see subsidy for coal as a terrible evil. I do not, even if I have come to that view reluctantly. Obviously, in a sense there is subsidy for renewables, because of the renewables obligation. There are all sorts of tilts to the playing field and part of the work of the energy review will be to develop a rationale for that, and some transparency.

There is no doubt that the fiscal environment that Governments can create will affect decisions on investment in any form of generation, including nuclear. As I said earlier, Governments will not be building nuclear power stations in future, but clearly, those who decide whether to invest will be influenced by the context. The energy review will doubtless make a recommendation on that, but the Government will decide.

Mr. Jack: Will the Minister explain, given his understandable and proper emphasis so far on renewables, why the new electricity trading arrangements militate against renewables and against combined heat and power?

Mr. Wilson: That is an interesting and proper question. The explanation goes back to something that I said earlier about the balances involved. The new electricity trading arrangements have, in their own terms, been an enormous success. The wholesale price of electricity has dropped in a few months by about 25 per cent. That will feed through into bills for domestic consumers and industry. The man and woman in the street may not be intimately familiar with NETA, but if they are told that it has brought about electricity price cuts on that scale they are likely to be in favour of it. That is probably common ground. However, there are side effects, which impinge on Government policy. We are in favour of competitive markets and of cutting energy costs through efficiencies, as well as the trading arrangements that have been introduced but, as the right hon. Gentleman rightly implied, we are also in favour of renewables and combined heat and power. The question is to what extent does one set of objectives cut across the other, and what can we do about it?

The impact on renewables and on combined heat and power would not have been a reason not to introduce NETA, but it is a reason to study, at this early stage, the effect of each on the other, and to ameliorate any harmful effects, if possible, once they have been more precisely identified. That is why we are now carrying out a consultation on the impact of NETA on renewables and small generation.

As the right hon. Gentleman said, NETA is perceived to have had a particularly adverse effect on combined heat and power. That bothers me a lot. As I have said repeatedly, I shall not keep talking about targets for combined heat and power if the real trend is in the opposite direction. It is, however, fair to recognise that NETA is not the sole source of the current difficulties facing combined heat and power. Arguably, the high price of gas and the rapid increase in gas prices in the past year is a bigger factor.

I hope that the right hon. Gentleman will read the small print in yesterday's pre-Budget statement, which contains an interesting passage on combined heat and power. It recognises the difficulties and, while it does not provide a specific undertaking as to the climate change levy, it gives a pretty strong nod in that direction. We shall continue to work on that.

Mr. Jack: On a point of order, Mr. Olner. In your response to the hon. Member for South Thanet (Dr. Ladyman) you drew the Committee's attention to the terms of the motion. I seek your guidance on the status of the motion, given that it has yet to be moved. My understanding of the procedure of the Committee is that the Minister makes a statement and that we hold a Question Time before moving on to debate the motion to which the earlier point of order referred.

The Chairman: That is correct, but the Question Time relates to the subject matter.

Dr. Ladyman: Further to that point of order, Mr. Olner. I want this clarified, because it is an important issue. The resolution, when it is eventually moved, will refer to document 5619/01, which deals in general terms with security of energy supply by discussing the energy options that are available to European Union member states. In that context, discussions of renewables, nuclear power and other forms of energy supply would seem reasonable.

The Chairman: I was trying to steer the Committee towards understanding that the question was not totally about nuclear energy versus renewables or other forms of supply. The hon. Gentleman is quite right. All forms of energy and supply can be discussed.

Rev. Martin Smyth: The Minister spoke about the level playing field and the concept of private or Government activity. Does he think that the plan to use more renewables could be hindered by some planning law, particularly in England, when one bears in mind that private developers have had to go to Scotland to get on with renewable supply? Do the Government have any thoughts about how that will affect our hopes of reaching the target even by 2010?

Mr. Wilson: The hon. Gentleman has raised an important point. It is of concern to us and the answer is yes; I hope that we are on the point of doing something about it. The difficulty was made clear to me when I visited a wind farm that had just been opened in Cornwall. It was a modest affair of 16 windmills up a hill, doing no harm to anyone and barely visible from any inhabited area. It struck me as extraordinary that it was the biggest wind farm to open in England since 1993. At that rate of progress the percentage we reach by 2010 will not be 10 per cent. but 0.01 per cent. As a contribution to the country's energy needs that is a joke.

I do not decry or underestimate people's right to obtain planning inquiries and to object to proposals, but systematic delay of every project is not compatible with our objectives. That is clear. It is pretty well established that while every proposal for a wind farm attracts objections, once wind farms are set up, the objections largely evaporate. The wind farms come to be regarded as good neighbour developments. Some bigger proposals are now being put forward for wind farms. I hope that the planning system will give them a fairer wind, where appropriate, than at some times in the past.

While I was the Minister responsible for this matter in Scotland we changed the planning rules and made projects transportable. If, once they had approval under the renewables obligation, or its predecessor arrangement, they ran into planning difficulties in the location originally proposed, another site could be sought without the need to go back to square one with respect to the obligation. That approach has been quite successful in freeing up projects and enabling them to make progress. That is clearly an option for the rest of the United Kingdom.

With particular reference to the hon. Gentleman's interests—and indeed my own—the other big barrier to the contribution to be made by renewables is infrastructure. In many of the places that are best suited to producing the stuff, the infrastructure is so weak that it cannot be got to where it is needed. It is relevant to Northern Ireland—and possibly to the Republic—that I have initiated a consultancy report on the feasibility of a sub-sea cable, down on the western seaboard of the British mainland. If that proves feasible and works, it could be good for renewables and the places that are capable of generating them.

Mr. Lansley: I apologise to the Minister for reverting to the subject of tax measures, but when he referred to the renewables obligation he did not discuss the climate change levy, which seems to me to be a tax measure by another name, and designed to influence the choice of energy sources. If he believes that to be right in particular circumstances, does he find it acceptable in EU circumstances? Therefore, is his objection to the introduction of EU-wide measures, rather than to the use of physical measures to influence the choice of energy supply?

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