Energy Supply

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Mr. Wilson: Having recovered my breath I apologise for my earlier hesitant start to the debate. There was some confusion about the Room in which it was to be held and I had to make a rapid dash, so I was grateful for the Committee's sympathy. I put it no more strongly than that. One thing that I have learned from today's proceedings is that I must do something about my personal fitness.

We had a good debate and a relatively non-partisan one. [Interruption.] I see the hon. Member for Teignbridge laughing, but he must expect that. I am sure that the prospect of the hon. Member for Salisbury appearing on the streets of Teignbridge and passing among the people distributing tracts filled him with alarm and that he will review his attitudes henceforth.

The Government have welcomed the Green Paper because the consultation process that it initiated in Brussels and in the UK will help to develop a shared vision of European security of supply for the future. It is timely, because we were engaged in that debate about security of supply anyway. The energy review had been contemplated before the events in California. It is trite to draw close parallels with what happened there, but it is a useful reminder that in the most prosperous state in the most prosperous country in the world, the lights went out. Security of supply is not guaranteed unless the necessary action is taken. We must tackle the supply and demand balance, while seeking to minimise potential risks of dependence and meeting environmental objectives. The flow of debate today has shown the challenge of getting that combination right.

We all share roughly the same analysis, even if we do not come to the same conclusions. We shall be dependent on rising imports, largely from outside the EU. The future of nuclear power is a key choice and there is an obvious difference of opinion about it. As I said, in the past few months we have at least stimulated the debate in an intelligent fashion that has been avoided for far too long. By asking the question, we have liberated the arguments and choices that have to be made. The idea that nuclear power could be allowed to fade away in a conspiracy of silence has been discredited and the debate is now taking place. We also agree on the role of renewables, however we quantify it, and on the contribution that energy efficiency could make, which my hon. Friend the Member for Dundee, East (Mr. Luke) properly brought into the debate.

I shall digress slightly for a minute or two. I was delighted to hear that the hon. Member for Salisbury spent his early days reading the West Highland Free Press, although I regard it as failed missionary work in that he grew up to be a Tory. I balance that by saying that he is a relatively humane Tory, so I suppose that there was some success. He might remember a long-running but unsuccessful campaign about the connection of the Outer Hebrides to the national grid about 20 years ago. That involved putting unsightly pylons through some of the most beautiful landscapes in the west highlands and Skye and a sub-sea cable to the Western Isles.

I remember arguing over a long period at the time that that was the ideal opportunity to develop renewables in the Western Isles, with the then back-up of diesel power stations. Twenty years ago, we could have developed wave power, wind power and further hydro power in those islands. Sadly, in those dark days, an unenlightened Government were in power who did nothing to encourage such concepts and it was easier to run pylons through the countryside, so we lost 20 years on renewables.

I am serious about renewables. I take the stricture about quantities, but we had the lead on wind power worldwide 20 years ago, with a company that was the leader in that field. We lost that and it passed to Denmark. Anyone who thinks that renewables are about beards and sandals and the odd windmill on a hill should recognise that Denmark now has a worldwide wind-power industry worth £4 billion a year. That is big business. One reason why I genuinely support renewables is that they are capable of producing not only electricity, but jobs in places that have the natural resources.

I do not want renewables to be pitted against anything else. That is not the subject of debate, as they will not replace any other form of generation. However, we want to maximise advantages in, for instance, wave power. We lead the world in wave-power technology, with the only commercial wave-power station in the world in operation on Islay. We must ensure that we keep that lead and end up with the £4 billion industry exporting our wave and developing tidal technology to the many places in the world for which nuclear and gas are not options, but which will need generation from renewable sources. I spoke of the hon. Gentleman's early exposure to such sensible views, which has not been entirely lost on him. I recommend continued instruction.

The Government are committed to competitive markets, here and in Europe, and to continuing efforts to complete European Union liberalisation. I think that I deserved some modest praise for the openness of the letter to Lord Brabazon of Tara, from which the hon. Member for Salisbury quoted. That letter openly sets out our position and views and is the sort of document that can be quoted against the author, although I have no complaints about the way in which the hon. Gentleman presented it.

A delay of a year or two is acceptable against the alternatives, because we cannot instruct others to sign up. We can only continue to negotiate and use the levers at our disposal. We may reach our target a year or two behind schedule, but that is better than not getting there at all and, if we were simply engaged in megaphone diplomacy, that would be the realistic alternative. However, it is worth pointing out that qualified majority voting applies in this matter, so the ability to apply pressure exists. A delay of a further year or two is not desirable, but it may be acceptable as an alternative to deadlock, which is what we might otherwise have.

On specific points, the hon. Member for Salisbury asked about the north Yorkshire line. In that case, a planning issue caused the delay, but the line is being built and will ease the England-Scotland flow. As for NETA, the long-term market is slow to develop and the first winter will help to give experience. We recognise the problems, as well as the successes, that have arisen from NETA, and they are being examined.

On the final point made by the right hon. Member for Fylde (Mr. Jack) about combined heat and power, I do not deny the problem as I know about the British Sugar and Slough examples and about the investment decisions that have been delayed or reversed as a result of a change in the market for CHP.

Three factors are involved, which we are addressing. First, I drew attention to what the Chancellor said yesterday in his pre-Budget statement on the climate change levy. That may fall short of what some people ideally wanted, but it at least provides a pointer in the right direction and involves a recognition of the problems, so I am sure that they will be fairly pleased with the statement.

Secondly, we should remember that NETA has only been operative for a few months. If NETA is working against our stated objectives, we cannot do much better than to consult on the impact at this stage, with a view to discovering what we can do about it, albeit against the constraints with the independence of the regulator.

Thirdly, it is only fair to take up the point made by the right hon. Gentleman, who referred to the price of gas. That has been one of the big problems for CHP and, as I said, we are trying to get to the bottom of the matter. However, the situation is out of our direct control to a large extent. My message to the CHP industry is that no one thinks that it is crying wolf. There is a real problem and we are trying to deal with it. I regard that as a personal obligation because I have heard about it at first hand.

Richard Younger-Ross: Does the Minister accept that Ofgem said that the matter was not in its hands alone and that it would like Government instruction on it?

Mr. Wilson: That is fair enough—the matter is not in Ofgem's hands alone. Given the independence of the regulator, the process by which we achieve a synthesis of views after consultation on the effects of NETA and make progress is ill defined. Ofgem is not being obstructive: it rightly highlights the other consequences of NETA and properly asks how we should make our declared objectives compatible given that they may run counter to NETA. Genuinely interesting work is being done on that. Ofgem and NETA are in their early stages and we must find out how matters can be dealt with in as consensual a way as possible.

Hon. Members mentioned buildings, which I discussed last night with my Belgian counterpart. The Belgians hope that progress will be made on the issue under their presidency of the EU and we are working with them on the buildings directive. We are aware of the need to get the details right and to avoid the problems of poor design and condensation.

The Belgian Minister and I spoke about all sorts of other interesting things, including boilers. As it stands, the directive calls for the regular inspection of boilers. That has given rise to concerns about headlines in The Daily Telegraph about boiler snoops descending in their thousands on people's homes, so we are trying to tone down the boiler problem. We hope that the Council meeting in December will make progress on the energy efficiency of buildings.

My hon. Friend the Member for South Thanet rightly mentioned geopolitical issues in the context of gas. We must consider where gas will come from. Much of it will come from Norway, but our sources will also include Russia, parts of the former Soviet Union around the Caspian Sea, Algeria, Egypt and eventually Iran. My hon. Friend's comments on all those had a degree of validity. We are not basing our policy only on Russia. The EU should think coherently about all its sources of gas, not only Russia. It should take account of the market conditions that my hon. Friend visualised. We must ask ourselves—this is part of the reason why we need an energy review—to what extent we should become dependent on such sources of gas. That is important not only in terms of our increasing dependence on gas but for our whole economy. That is part of the review.

There are many reasons why the review and our debate are necessary. Nuclear energy is in decline and accounts for 25 per cent. of supplies. We shall become a net importer of gas in a few years, although we hope to extend that period. North sea oil production is slowing, although we hope that we can reduce the pace of decline. We are becoming more dependent on gas imports and I mentioned the projected figures. At the same time, we have Kyoto obligations, which inevitably raise the role of renewables. That dramatic and unique combination of circumstances justifies the energy review, but it will not be the end of the debate, only an intermediate point. I am sure that we shall have many more discussions.

Question put and agreed to.


    That this Committee takes note of European Union documents Nos. 5619/01, the Commission Green Paper, Towards a European Strategy for the Security of Energy Supply, and 7218/01, relating to common rules for the internal market in electricity and natural gas; and supports the Government's welcome of both these documents as the Green Paper provides analysis of the energy supply situation and the proposed Directive and Regulation would increase competition in the internal energy market and facilitate cross-border trading in electricity and thereby contribute to security of supply.

        Committee rose at One o'clock.

The following Members attended the Committee:
Olner, Mr. Bill (Chairman)
Henderson, Mr. Ivan
Hesford, Stephen
Jack, Mr.
Ladyman, Dr.
Luke, Mr.
Murrison, Dr.
Smyth, Reverend Martin
Swire, Mr.
Wright, Mr. Anthony D.
Younger-Ross, Richard

The following also attended, pursuant to Standing Order No. 119(5):

Caplin, Mr. Ivor (Hove)

Grogan, Mr. John (Selby)

Key, Mr. Robert (Salisbury)

Lansley, Mr. Andrew (South Cambridgeshire)

Stewart, Ian (Eccles)

Wilson, Mr. Brian (Minister for Industry and Energy)

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Prepared 28 November 2001