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Colin Burgon (Elmet) (Lab):
The recent dispute between Russia and Ukraine has given the debate a sense of urgency, and the question of energy has entered the public consciousness in a way that I have not known before.
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I was surprised by the reaction of some right-wing think tanks and Government spokesmen in the USthe terms may be interchangeablein criticising Russia's role in the dispute. The advice when communism collapsed was that Russia needed a big dose of marketisation, so there is a whiff of hypocrisy in the air. The US has never been afraid to use its muscle in the energy sector, the oil embargoes that it has imposed on Cuba being only one example.
I understand that the price that Ukraine paid to Russia for gas was about one fifth of the level in western Europe. It could be argued that that was detrimental to the wider environment, and I am sure that the Russians would argue that it was also detrimental to their economy. However, we should not be surprised by what happened in that dispute, as greater marketisation will inevitably lead to more conflicts of that nature. I was glad to hear my right hon. Friend the Secretary of State say that diplomatic channels represented the best way to deal with such problems in the future.
The conflict between Russia and Ukraine caused certain people in this country to express their ideas about how to ensure security of supply in the future, but we must put the matter in context. As has been pointed out, we get roughly 70 per cent. of our gas from Norway; we do not get it from Russia.
At the head of the queue of people giving us the answers to our energy problems are those in the tremendously powerful nuclear power lobby. I do not want to go into too much detail, but I have several questions for them to answer. First, how will we manage the increased amount of nuclear waste? What about the costs of a new nuclear programme? I have read that six new stations would cost some £26 billion. Interestingly, some Opposition Members have said that the state should play a key role in underwriting the building of new nuclear power stations. I think that that proposal is very dangerous.
Another question has to do with wider security matters. If the UK goes nuclear, other countries will follow, and the existence of a broader nuclear skills base clearly increases the possibility that countries will acquire nuclear weapons. North Korea and Iran are obvious examples of that. American intelligence sources are occasionally worth listening to, and I understand that they have learned that al-Qaeda was thinking about attacking nuclear power stationsanother factor that must be taken into consideration.
Even if a green light is given to new nuclear construction, decades will pass before such stations will be able to supply power. In contrast, measures can be introduced now to promote energy efficiency and renewable generation. I hope that the Government will not give way on the objective of getting 10 per cent. of electricity from renewable sources by 2010, rising to 20 per cent. by 2020.
Promoting energy efficiency is a wise, sensible and practical policy, but we must not forget to look at the efficiency of electricity generation. It has already been pointed out that electricity generators lose all but some 38 per cent. of the energy of their fuel through inefficient technology. On the consumption side, only 18 per cent. of houses in Britain are fully insulated. A detached house built in Britain, even under today's modern standards, consumes nearly 20 per cent. more energy
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than the equivalent home built in Denmark. Perhaps we should appoint an energy conservation tsarwe would have to clear it with the Russians firstwho could massively raise public consciousness on the issue.
If security of supply means looking at what we can promote domestically, I add my voice to the strong case that has already been made for our deep-mined coal industry. Some 33 per cent. of our electricity is generated by coal, and 60 per cent. of that coal is imported. It is reckoned that in Britain we have 200 years of coal reserves, but only 40 years of gas reserves. We have used only 15 to 20 per cent. of our coal reserves in the past 100 years. As has been pointed out, carbon sequestration and underground gasification offer the prospect of clean coal technology, and it is much further advanced than people would have us believe.
There is a need for investment in the coal industry and we need to take a long-term view. I welcome the £35 million in grant aid from the Government to demonstrate the possibilities of carbon abatement technology, and I understand that it will come on stream in April this year for some four years. However, more operating and investment aid for coal should be considered. At present, the Government provide 30 per cent. of the cost of development work and the coal producer has to find the other 70 per cent. The current investment aid fund has been used up, but banks will not lend against the short-term contracts that are placed by the generators with the coal suppliers. In the United States, coal suppliers have 25-year contracts. Why cannot we have them in this country?
Coal mining is a long-term, capital-intensive business, requiring some form of Government interventionthat might not be popular with somein the current structure of the market to ensure continued supplies of UK deep-mined coal. Loans, or loan guarantees, secured on future coal sales are a possible answer, and I hope that the Minister will address that point when he winds up.
I accept that we need an energy mix and should not rely on one particular fuel. However, I desperately want the UK deep-mined coal industry to be part of that mix. Action is needed urgently, because we now have only eight collieries and we lack the critical mass that the industry needs to retain the experience and skill and preserve it for the future. It may be an unpopular suggestion, but I believe that there is no future for the coal industry unless it is brought back into public ownership.
I question the 2003 energy review which concluded that the Government would not intervene in the market except in extreme circumstances. Markets are not infallible, and indeed they often tend towards short-term thinking. There is a role for Government and I hope that this review will confirm that.
Peter Luff (Mid-Worcestershire) (Con):
I suppose that every Select Committee Chairman thinks that the subject his Committee covers is the most important facing the country, but there is a strong case for saying that the subject of today's debate is one of the very most important. Therefore, I hope that the Minister will accept that I am not being partisan when I say that I am very disappointed by the length of time available for this
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debate. Three hours is not enough, as the ridiculously short limit on Back Benchers' speeches and the competition to speak demonstrate. It falls short of the assurances that we were given about a full day's debate on this subject.
There was a very good debate on the issue yesterday in the acting Westminster Hall, introduced by the hon. Member for Paisley and Renfrewshire, North (Jim Sheridan). I am sorry that I was not able to attend, but I have read the report of it. I was struck by the considerable consensus in that debate, which we have seen again today, about the basic issues confronting us, especially the need for diversity of provision andan issue I wish to emphasisethe protection of skills in the different energy sectors.
I have two initial thoughts. It is said to be a Chinese curse to wish that someone live in interesting times, but this is one of the most fascinating intellectual, technical, economic, environmental and geopolitical issues of our time. I am surefrom speaking to them privatelythat Ministers relish the challenge they face. The trouble is that media coverage and public debate tend to be in inverse proportion to the seriousness of issues because the very complexity that we face in this issue tends to put people off. Sometimes, if we are honest, we are distracted from the most pressing issues by the interest in other less important issues.
I am glad that the hon. Member for Elmet (Colin Burgon) mentioned the actions of Russia and Gazprom, which have done us in an incalculable favour. Digby Jones was, if we are being honest, being a bit alarmist towards the end of last year, and Ministers were probably right to be cautious in their response, but energy supplies are now extremely precarious and becoming more so. Until this winter is over, and it is not over yet because British winters can easily last until Easter, we cannot breathe easily. Whatever the weather, the Russians have not only done us a political favour by reopening the debate and forcing the issue up the agenda; they are also moving us closer to a proper wider European energy market wherein prices are rather closer to true market conditions.
Perhaps the Russians picked on Ukraine partly for political reasons, but they were selling their gas far too cheaply, and the movement to market prices will enable countries such as Ukraine to take more rational decisions about how they use energy and force them to close their windows in the winter. The growing concerns about energy prices and security of supply are forcing a much more mature debate in this country as well, as we have seen here this afternoon. The Russian action forced the issue right into the headlines. I am told that my Committee's grilling of the Minister for Energy on 31 October was the Christmas highlight of the Parliament Channel, with frequent repeat showings throughout the recess. The hon. Gentleman shakes his head, as I do, because sadly there is no appearance fee on the Parliament Channel.
The February 2003 White Paper struck many of us as rather disappointing, and it is welcome that a review is under way and being conducted with some urgency. As for its conclusion, I am not sure what early summer means, but I hope that the Minister can stick to that deadline. It took quite a long time from rumour, leak,
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briefing and a declaration of intention to actual announcement of the review, but I am glad that we have got it.
These are issues that, as previous speakers have said, have concerned the Trade and Industry Committee for many years now. In the last Parliament, there were two major reports, in early 2002 on the security of energy supply and early last year on fuel prices, under the excellent chairmanship of Lord O'Neill of Clackmannan. As this is the first time that I have spoken as Chairman of the Committee, I would like to pay a special tribute to Lord O'Neill. He was a fine Chairman and he is sorely missed; I am glad that he is still benefiting us with his expertise in another place.
It will come as no surprise to the Minister if I tell him that we meet next week to consider how we will conduct our parallel inquiry into the Government's review. Already in this Parliament we have looked at gas in a report published last month, to which the Government responded today. I had hoped to speak rather earlier in the debate and draw the attention of the House to the fact that the Government have responded to the reportnot something that was put on the record in the Deputy Speaker's opening statementand that the response is available in the Vote Office.
It is a very good response. In fact, I go so far as to say that it is one of the most exceptionally helpful, thoughtful and constructive responses I have known in my time as Select Committee Chairman, in this case and as Chairman of the Agriculture Committee. It treats all our recommendations with great seriousness and allays my concern in many areas. It makes encouraging noises about those people, other than the elderly, who suffer from fuel poverty. On industry, it says some helpful things about how it intends to help big users, and I am glad about that.
I have in my constituency a big brick manufacturer, Baggeridge Brick. We must recognise that the demand response of which the Government's response to our report speaks means that the capacity is not there, and brick factories have been closing. Hanson has already closed a quarter of its factories for the next month, and Baggeridge Brick has written to me to say:
"Unless something is done quickly to stabilise the gas price then the only possible outcome can be further job losses in the UK manufacturing sector and increased import penetration of building materials from Northern Europe."
The question of European liberalisation is one of the other big themes of our report, and it has been a big theme of this debate. We all want it, and I think that I join in the criticism that not enough has been achieved during the presidency, but it is a very difficult thing to achieve. Can the European market be liberalised in the short term without requiring Governments and the private sector to tear up perfectly legal contracts? That is a legal challenge for us. Liberalisation of the European market is high on the Commission's agenda.
When we went to Brussels before Christmas I was very impressed with what I heard from officials there, but one cannot argue with the fact that the UK will struggle to buy gas in Europe unless either it is able to set up long-term contracts similar to the ones that already exist there with gas producers, so undermining development of the real gas market to which we all
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aspire, or European countries voluntarily, or as a result of being forced by the European Union, surrender their long-term contracts and trust themselves to the competitive market. These are difficult issues. I had hoped to say more about storage, but it has already been extensively covered, and I welcome both the Government's response to our report and the Secretary of State's helpful opening remarks.
The last energy policy White Paper in 2003 may have been disappointing in some respects, but its goals remain valid: cutting carbon dioxide emissions, maintaining the reliability of energy supplies, promoting competitive markets in the UK and beyond and ensuring that every home is adequately and affordably heated. Perhaps we can now have a rational debate in the context of the Government's energy review, where prejudices for and against any one energy sourceincluding, I must say to the Liberal Democrats, nuclear powerare abandoned for hard fact in the face of compelling reality.
I will not prejudice my Committee's work, but I am sure that we shall conclude, as the House has, that over-dependence on imported gas from countries with less than perfect political stability is a bad thing; that renewables and clean coal technology have a crucial role to playcome back coal, all is forgiven; that energy efficiency needs to be improved to combat climate change, not so much in the industrial sector but in the domestic and transport sectors; and that the emissions trading scheme, which sets the price of carbon, will have a crucial role in deciding whether the private sector can invest in nuclear power. We may even approach consensus on the nuclear question, although carbon neutrality issues are much more complex than they seem: how much energy goes into mining uranium, or into building nuclear power stations or wind turbines?
This is one of the most important debates that the House will hold in this Parliament or the next. It does not end today; it merely begins. But at least in part, thanks to the apparently reckless actions of Gazprom, it may be better informed and more urgentas it needs to be.
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