Scottish Energy in the 21st Century

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Mr. Alex Salmond (Banff and Buchan):I thought that the Minister was rather disingenuous. In the past, huge subsidies have been given to the nuclear industry and, even now, there is a write-off of past liabilities on the nuclear industry's balance sheet. I hope that the hon. Gentleman is not taking assurances from previous Energy Ministers on face value. They said that the nuclear industry would have to compete with other forms of electricity generation on a level playing field, but the assurances were never honoured.

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Malcolm Bruce: The hon. Gentleman and I are as one on the matter. The scale of the subsidy and the openness of delivering it are such that it will be difficult for the nuclear industry to hide under a manipulated regime, which it has done in the past. It has received £9.5 billion of subsidies over the past 20 years, but the entire renewable sector has received less than £1.2 billion. There can be no justification for such distortion in the future.

Of course, one may argue that nuclear power does not produce greenhouse gas; that is the only argument that the industry has going for it. However, renewable sources do not produce that either, and they are cheaper and require smaller subsidies. The capacity of renewables has been largely untapped, and progress toward renewable sources must be correct. It would be foolish to choke off that avenue because we are subsidising a technology that been has proved not to work.

Mr. Savidge: We are in cross-party agreement. We must have a clear and level economic playing field when considering write-offs of past costs. However, we must not ignore future costs, such as decommissioning, storage of waste and eventual disposal of waste.

Malcolm Bruce: Estimates show that we must deal with £50 billion of accumulated costs. We should not add to that problem.

My next point addresses the point made by the hon. Member for Banff and Buchan. We are not in a completely free market. The Government set the trading and obligations regimes through the regulator. We must demand that the process is open and transparent. It must be clearly devised to expand renewables rather than nuclear power.

Mr. Russell Brown (Dumfries): I fully appreciate everything that the hon. Gentleman is saying. He said that we must address renewables by unlocking capacity and being able to deliver. However, the delivery of such potential will take considerable time. The Minister for Industry and Energy disclosed that 50 per cent. of energy in Scotland is based on nuclear power. In the light of that, does the hon. Gentleman not see a future for nuclear power generation?

Malcolm Bruce: I do see a future for it, because there are operating nuclear power stations. No one—not even Greenpeace—is calling for them to be shut down immediately, because that would not solve the problem. So long as they are operating safely, they should continue to operate to the end of their useful life. I am concerned that we might have extended the life of some of them further than anybody believes is right—although the lives of none of the Scottish stations have been extended too long, except, perhaps, the one in the hon. Gentleman's constituency, although his assurances about it lead me to accept that it should continue to operate.

Nuclear power should wither on the vine. There is no longer any justification for diverting investment into nuclear power technology, because we will have a

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ripe harvest to reap, if we are prepared to invest a fraction of the amount that nuclear power has received.

I am concerned that although the new electricity trading arrangements—about to become the British electricity trading and transmission arrangements—have lowered the price of fuel, they have also distorted the market. In England, combined heat and power, which is a very efficient way to use gas, expanded rapidly but has now collapsed. We are still waiting for the Government to say how they will deal with that problem. Unless they swiftly solve it, their targets will not be met. It is estimated that £3 billion of combined heat and power investment has been cancelled because of the collapse.

Scotland is not as well developed as England with regard to combined heat and power, but the Combined Heat and Power Association, of which I am a vice-president, has suggested that a couple of developments in Scotland would not have happened if the new electricity trading arrangements had been in place. Therefore, we must ensure that the changes are not introduced at a time when they might knock some promising developments on the head. The fuel poverty lobby is of the view that we should not deregulate the gas and electricity markets until the trading arrangements have settled down. I merely ask that that point be taken into account, and responded to constructively because it is a cause for concern.

I represent a part of the country that has been heavily involved in, and has greatly benefited from, the oil and gas industry. In recent months, there have been several announcements of job reductions—companies rationalising and slimming down, which could give the impression that the industry is in trouble. The reality is that although the United Kingdom's continental shelf is a mature province, it has a long-term future. Its character is changing. It is also expensive and we are discussing a very competitive industry. To maintain our ability to operate profitably, we need a benign licensing and taxation regime. I have occasionally been concerned that the Government have threatened to destabilise that regime, but I also welcome the fact that those of us who made representations to persuade the Government not to do so have been successful.

All of the companies that I speak to say that, as long as there is not a major adverse change, they will continue to invest in the North sea. Therefore, the industry continues to offer a real career to young people and it is facing a problem. It needs reskilling—a new generation of skills. I would like to believe that the schools, colleges and universities in Scotland—especially the north-east of Scotland—will make a major contribution to teaching people those new skills.

Some young people are saying that they do not want to join an industry that is shedding jobs. It is important to get across to such people that the industry is changing, but it is not in terminal decline, that it offers many exciting technical challenges and that many innovations and new ideas are being generated in its quest to squeeze out more oil and gas.

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I was a close observer of the development of the oil and gas industry in its infancy. When the first fields were being announced, the projected recovery was entirely based on an assumption that only about 40 per cent. of the oil would be taken out of the reservoir. That seemed scandalous, even at the time. The people who made that assumption said, ''That is all we can cope with, because the pressure will drop.'' Now we are talking about taking out 60 or 70 per cent. of the oil. That requires a variety of ingenious techniques, many of which have been developed by companies in Scotland. I want to put down the marker that, with the right climate, commitment and integration between colleges, universities and the industry, there is a bright future for those who want to make the industry their career. It will employ thousands for many years to come and make a useful and significant contribution to the United Kingdom economy.

Mr. Savidge: The hon. Gentleman has been generous in giving way. Does he also agree that, as the Minister suggested in his statement, the unique co-operation between Government and the industry in PILOT has done a great deal to make it possible to exploit mature and fallow fields?

Malcolm Bruce: I will go further. I welcome the fact that what I regarded as a precipitative statement by the Chancellor of the Exchequer when he first came to the job has turned into an extremely constructive relationship. When he was in opposition, he took the view that the oil and gas industry would be a useful source of revenue to fund his programmes and he thought that he could squeeze more tax out of it. I give him credit that he listened to the review that he had initiated. The arguments were well put by the industry and a co-operative environment was created—the Secretary of State for Scotland was involved in that. That environment has broadly continued. I find that many of the top managers in the industry are reasonably appreciative of their relationship with Government and their ability to have access and input in a constructive way, so the co-operation is beneficial.

The Liberal Democrat view is that Scotland has a huge potential to unlock a green technology that is right for the 21st century and offers a massive spin-off in terms of jobs, investment, exports and overseas aid opportunities. We are looking for a Government-inspired initiative to unlock that potential and enable the people of Scotland to do what they ought to be able to do—be world leaders in benign renewable technology. We have the capacity and we ask the Government to help us unlock it.

11.26 am

The Secretary of State for Scotland (Mrs. Helen Liddell): I congratulate the hon. Member for Gordon (Malcolm Bruce) and his colleagues on securing this debate, which comes at a fortuitous time. It is a good idea to have this debate prior to the publication of the performance and innovation unit study because we have the opportunity to explore some of the issues that we will no doubt be examining in some detail in the years ahead. I am grateful for the opportunity.

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I shall be brief, as Back Benchers from all parties wish to contribute—I have been warned by the Whip to ensure that there is plenty of opportunity for them. I should point out that my hon. Friend the Member for Stirling (Mrs. McGuire) is not sweetened in her attitude by the fact that it is her 30th wedding anniversary. [Hon. Members: ''Hear, hear!''] I have been trying to think of a way of getting pearls into the debate, although I do not think that I should refer to casting pearls before swine, as you would probably rule me out of order, Mr. O'Hara.

I am interested that the hon. Member for Gordon concentrated on renewables. He developed the theme that the Government need to create space for renewables in the marketplace. That is what lay behind the Utilities Act 2000, which introduced the renewables obligation, obliging electricity suppliers to ensure that a proportion of their electricity came from green sources.

My argument has always been that we must move renewables from the fringes of electricity supply to the main stream. That is what the renewables obligation is about. Renewable energy accounts for 10 per cent. in the United Kingdom but 18 per cent. in Scotland, as my hon. Friend the Minister for Industry and Energy pointed out. That is a result of the great vision of people such as Tom Johnston, who saw the opportunities for hydro 15 years ago, which provided a huge spark to that sector.

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Prepared 13 February 2002