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Malcolm Wicks: That's not true.

Mr. Duncan: If it is not true, I look forward to the Minister saying so when he winds up, so that it is on the record.
12 Jan 2006 : Column 498

Malcolm Wicks: It is on the record.

Mr. Duncan: Well, it needs to be put there again.

Woking borough council has shown what it is possible to do in this area. While the Government continue to consume ever more energy, Woking council's decentralised energy system has reduced its energy consumption by 44 per cent. despite—perhaps the Minister can explain this—overcoming massive regulatory hurdles.

The Woking model implements a range of measures to increase efficiency and reduce emissions. Sustainable combined heat and power sources have been built in the borough that are up to 90 per cent. efficient. Those, along with solar and other renewable sources, provide power on a local scale, and so reduce the energy losses in transportation, and hence their overall consumption. To be fair to the Minister, at least the Government have awarded Woking beacon status in recognition of its work.

Local generation and the savings made also raise fundamental questions about the use of the national grid. The efficiency and structure of the national grid must form part of the energy review.

Malcolm Wicks: I am enjoying the hon. Gentleman's cleaner and greener remarks, but I wished to point out that because we are interested in micropower and microgeneration, we have been consulting on the barriers to it and we shall issue a report in the coming months. I would like to award the hon. Gentleman beacon status, but he needs to do a little more homework first.

Mr. Duncan: I am certainly a beacon of something, but I am not sure of what. I look forward to reading that report when it is published in due course. That brings me conveniently to my second point, which is that the Government could have done more to secure our existing energy sources. Given our heavy and increasing reliance on gas, surely alarm bells should have rung more loudly in Government when we became a net importer of gas in 2004.

The UK continental shelf used to act as a strategic reserve for gas. That was a crucial national resource. The immediate supplies are no longer there. I should be fascinated to hear from the Minister what estimates his Department has made of the extra oil and gas there would have been from the North sea had they not been so heavily taxed, especially by a windfall tax. That means that our import capacity and storage facilities are now perilously inadequate. [Interruption.] I hear protests from Labour Members, but it is an elementary economic principle that if one thumps something with a tax, one gets less out of it. The representations that we have heard give clear calculations that there would be much more oil and gas coming out of the North sea if they were not so punitively taxed by the Chancellor.

Paradoxically, we are highly dependent on gas, whose market structures are full of imperfections, and yet oil, so often labelled as a commodity controlled by a cartel, is in fact much more freely and flexibly traded in a much more free and transparent market. I caution the hon. Member for Stoke-on-Trent, North (Joan Walley) against railing against speculators as she did, and urge
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her to study the workings of energy markets the better to understand how prices are set. The thing about the free market is that that is not the case for gas, and that is our key electricity-generating fuel.

The persistence of oil index pricing in the European market imposes costs to the tune of £10 billion a year on British consumers. The recent large increase in the price of gas on the continent has little to do with broad supply and demand issues for gas as a commodity, but rather derives from the more general problems in the European gas market. As my hon. Friend the Member for Bournemouth, East (Mr. Ellwood) said earlier, the Government did nothing about that when they held the presidency of the Union.

Moving on to my third point, we can improve our energy security position—

Paddy Tipping: Will the hon. Gentleman give way before he moves on?

Mr. Duncan: One day, the hon. Gentleman will move on, but I am waiting.

Paddy Tipping: I am waiting too; I have been waiting a long time. The hon. Gentleman has made a great deal of the role of the market in energy supply. Does he agree that the key discussion point for the energy review will be how far the market operates and how far the state has a responsibility for guaranteeing energy supply? The market has served us well historically, but it may now be more important to have more direct Government intervention. Is that the view of his party?

Mr. Duncan: That is quite a serious point, and it is not an unreasonable one. Markets, in my view, serve the interests of energy extremely well, but inevitably there are issues of security, spare capacity and the ability to swap from one commodity to another which markets cannot always automatically do as quickly as consumers desperately need them to. The interrelationship between the state and a free market is crucial for that and also for the investment climate in which people take long-term decisions. That question should be in the review, and we will look at it sensibly and responsibly, as the hon. Gentleman implied.

Several hon. Members rose—

Mr. Duncan: I give way to my hon. Friend the Member for Windsor (Adam Afriyie).

Adam Afriyie: My hon. Friend may not be aware that Centrica's headquarters is based in my constituency. At a recent meeting that I had with its chairman and several others, they made it very clear to me that they have been making representations to the Government for many years, saying that the Government should sort out the liberalisation of the gas markets in the European Union. Does my hon. Friend share my alarm that no serious action has been taken by the Government on that front?
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Mr. Duncan: I fully agree with my hon. Friend. That, too, will be a serious focal point for the energy review.

John Hemming: rose—

Mr. Weir: rose—

Mr. Duncan: I hope that hon. Members will forgive me if I do not give way. I do not want to deprive the many Members who want to speak of the opportunity to do so.

We can improve our energy security position by establishing a technologically diverse energy supply sector. Let us take a look at the Government's record on that so far. Far from increasing our diversity, we have been shutting it down. Gas power now accounts for 40 per cent. of the electricity supplied in the UK, approximately double the reliance of 10 years ago. Nuclear power currently provides about a fifth of our electricity needs, but most of our nuclear power stations, as the Secretary of State said and we all know, are set to close, probably over the next 15 years or so. That will leave a capacity of only 7 per cent. of the country's needs.

New investment in nuclear power is obviously an option that we need to examine carefully. It has positive implications for climate change, diversity and the continuity of supply. Without nuclear build, many people believe that we shall struggle to meet our 2010 CO 2 obligations, even though most of our CO 2 challenge lies in sectors other than power generation. However, nuclear power raises serious concerns about national security, the handling of waste and its long-term economics.

Dr. Alan Whitehead (Southampton, Test) (Lab): I am listening carefully to what the hon. Gentleman is saying, especially his comment that a number of people suggest that nuclear power will be essential to meeting our 2010 renewables targets, when were we to press the nuclear button tomorrow not a single kilowatt of nuclear power would be produced for the next 12 years.

Mr. Duncan: If the hon. Gentleman had listened a bit more carefully, he would have heard the rest of what I said. I suggest that he reads Hansard.

The Secretary of State has to contend with the serious problem that for those wanting to invest in energy generation, in our current investment climate, the only viable sector that justifies long-term investment is gas. That is a massive problem for the balance that I imagine he wants in investment decisions. The present investment climate, which makes gas more attractive than anything else, compounds and risks compounding further our dependence on gas as our principal source of fuel.

Mr. Drew: Will the hon. Gentleman give way?

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