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The hon. Gentleman is quite right to point out that some action taken by member states has verged on the protectionist. In some cases, it has been downright protectionist. That is regrettable because a single market
should be just that. There should be a liberalised market for energy because that is the only way of benefiting both domestic and industrial consumers. We will do our best to ensure that there is such a market and I think that the Commission will enforce it rigorously. I just hope that the Governments of other member states also see the wisdom of liberalised markets so that we can get lower prices in the long term.
For the sake of completeness, I should tell the House that Richard Lambert, the director general of the CBI, and I chair a meeting of industrial users and others so that we can monitor the supply of gas, electricity and energy. Prices are a particular concern, although I hope that they will fall as a result of the actions that we have taken and because the market is beginning to realise that an adequate supply is coming through due to the various measures that I set out. As I said, Ofgem will monitor the market carefully to ensure that reduced costs incurred by suppliers are passed on to consumers at the earliest possible opportunity.
The second part of my speech relates to the energy review. I set out the Governments proposals in July and, as I said in the summer, we will publish a White Paper setting out our concluded views. The White Paper is likely to be published in March 2007.
Mark Tami (Alyn and Deeside) (Lab): We have had many reviews, and the last review identified many of the problems that we are facing. The problem in the past was that we did not tend to act on those reviews, or that if we did, we took short-term action. What assurances can my right hon. Friend give us that something will happen and that that will be for the long term, rather than the short term?
Mr. Darling: We certainly have to act because, as I said in the summer, we do not have the option of just letting things drift along. Many of this countrys generating plants are reaching the end of their lives, so a decision must be taken on how to replace them. As I said in July, our two overriding imperatives are the need to tackle climate change and the need to ensure that we have a secure supply of energy with affordable prices. That means that we must take action now, which was one of the reasons why I said in the summer that nuclear had to be part of the mix. I was critical of the official Opposition for saying of nuclear, Lets leave it and come back to it later, because I do not think that we have that option now. Anyone who has any doubt about that should read Sir Nicholas Sterns report and find out the urgency of the situation. We anticipated the energy review in the 2003 energy White Paper. We will publish our concluded views in March, and the document will provide a framework that will enable us to proceed and ensure that we have not only greener energy, but more secure supplies of energy.
Paddy Tipping (Sherwood) (Lab):
The energy review accepts that indigenous coal is important for the security of supply. Will the Secretary of State and the Minister for Energy examine closely the position of UK Coal and its relationship with generators such as EDF and Drax? At the moment, the contract between the company and the generators is at less than the world price. As a result, UK Coal cannot invest in the future of deep-mined coal and the three pits in
Nottinghamshire look very much at risk. Is there anything more that the Secretary of State can do to bring the parties together?
Mr. Darling: We said in the energy review that we wanted to establish a coal forum along the lines of PILOT, which is the forum between the oil industry and the Government. PILOT was set up a few years ago and has been highly successful at allowing the Government and the industry to discuss long-term strategy and changes that we might make to maximise the extraction of oil and gas from the North sea. We have the same model in mind for the coal industry. However, we cannot broker contracts between power and coal suppliers.
I have read the letter from the coal company to which my hon. Friend referred in which it is suggested that the Government might like to intervene. UK Coal and the operators of any power station need to understand that the only people who can sort out the contract are the parties to it. The Government are not going to stand in the shoes of either party to the contract. We can encourage people to talkI certainly think that they should talkif problems need to be resolved, because it is in all our interests that we maintain the ability to mine and supply coal in this country. However, alongside that, the power companies must be satisfied that they are getting the right price. I make it clear to the House and the parties concerned that if there are contractual differences or difficulties, the parties must sort them outthe Government cannot do that. The coal forum will operate at a slightly higher levela strategic levelas does the forum for the oil industry. I expect the first meeting of the coal forum to take place in November.
Mr. David Hamilton (Midlothian) (Lab): Although my right hon. Friend says that he does not want to interfere, will he be mindful of the fact that if we did not have UK indigenous coal, we would have to look at ways of importing coal? That would bring a different dimension to the situation because we would have to get that coal from the dockyards to the power stations, which would lead to major costs for the Government.
Mr. Darling: I understand my hon. Friends point, but I am clear that if there is a contract between two parties, they must sort it out. In my experience, if a third party offers to stand between two parties, it is often an impediment to finding an agreement. The two parties in this case are perfectly capable of reaching an agreement. However, they will need to sit down and talk about it. The Government cannot do that, but I hope that the difficulties can be resolved. I agree with my hon. Friend in that it would be a great pity if we lost the ability to mine the coal in this country that is still to be mined.
David Taylor (North-West Leicestershire) (Lab/Co-op):
Will the Secretary of State confirm that the slight majority of UK electricity used last winter was generated by coal-fired power stations? We have existing technology for co-firing biomass and improving thermal efficiency, which will drive down the carbon emissions from coal to the extent that it will be able to play a significant role in the medium and long term, especially given the long-term investment in
carbon capture. Some 800 million tonnes of coal are waiting to be mined in north-east Leicestershire, so there is a future for coal and coal miners.
Mr. Darling: I agree with my hon. Friend. There was a substantial switch from gas to coal last winter because of the high price of gas. I have always said that this countrys mix of energy supply has served us well. It would be a great pity if we put all our eggs in one basket, or even two or three baskets, because we need to ensure that we have such a mix. There are many examples, such as carbon capture, clean coal and biomass, of how we can still burn coal, yet significantly reduce the amount of carbon going into the atmosphere. Coming back to this business for the last time, however, I am fully aware of the contractual differences, but the only people who are going to resolve them are the parties to the contract. The Government cannot do that.
Bob Spink: Will the White Paper deal with the issue of the Government promoting or making investment in the new carbon capture and storage technologies, in which the UK can lead the world? Will the Government lead the change of regulation needed to enable marine storage of carbon so that we can move forward with large scale demonstration plants, which would be very helpful to the environment and may also help the economy?
Mr. Darling: I agree with the hon. Gentleman. That is why we emphasised the importance of carbon capture in the energy review published in the summer, and we undertook to publish further proposals. Since that time, we have also put forward proposals to encourage research into producing greener forms of energy. We will match the money raised by the private sector with Government money to encourage innovations such as carbon capture.
Peter Luff (Mid-Worcestershire) (Con): The Secretary of State is being remarkably generous in giving way. May I draw him back to the White Paper about which he was speaking? I welcome the return of a Green Paper to the policy making process, which the document effectively is. The most important consultation, on the policy framework for nuclear, ends tomorrow. There are a stack of other consultations in the document. What framework is the right hon. Gentleman putting in place to ensure that all those consultations arising from the report take place, or will the White Paper do that? It is important that the consultations promised are seen through and reported.
Mr. Darling: I agree with the hon. Gentleman. Especially in an area like energy, where we are dealing with 30 to 40 years development, we need to get it right. We need to move at a fairly fast pace, because we do not have the time to spend years thinking about all the possibilities. I can assure the hon. Gentleman that, as he knows, we are consulting on a number of strands of policy, following the energy review in the summer. Later this week we will publish a document on distributed energy. The strands will all be brought together for the White Paper.
In the summer I said that the White Paper would be published around the turn of the year, which is political-speak for March. It is rather like the political autumn, although this year the real autumn and the political autumn appear to be moving together for the first time in years. I concluded that we should not publish till March because I want to get all the consultations out, properly considered, and to reach a concluded view. That will provide the necessary certainty. Many hon. Members pointed out that more than anything else, the industry wants certainty. We can provide that.
I am conscious of the fact that this is a short debate and I shall not speak for much longer. All Members in the Chamber will no doubt have read the energy review, so I do not need to go through it line by line. It is important that we make progress. When I spoke last summer, I said that if we can implement the review, we believe that it would bring about a reduction of between 19 million and 25 million tonnes of carbon by 2020. By any standard, that would be a significant contribution to tackling climate change. The other proposals that we set out would also make a significant contribution to ensuring that we have secure, affordable supplies of energy.
In the past few years, energy has assumed greater importance than it has had in this country for many years. I am sure that we will have a number of debates such as this in the future. It is important not only that we get it right, but that we take action as quickly as possible to tackle climate change, meet the objectives set out in the Stern report today, and make sure that we have secure supplies of affordable energy.
Charles Hendry (Wealden) (Con): I start by offering the apologies of my hon. Friend the Member for Rutland and Melton (Alan Duncan), the shadow Secretary of State for Trade and Industry, who is away from Westminster today for a long-standing commitment which he was unable to change. That in no way diminishes the importance that he or we attach to the subject.
As the Secretary of State said, there could not be a more appropriate day for us to have the debate, following the publication of the Stern report this morning. I join the right hon. Gentleman in paying tribute to Sir Nicholas for his outstanding work. However, it is disappointing that we have only a half-day debate on energy supply. Had there been a full days debate, many other colleagues would have been keen to take part and the Secretary of State would have been able to deliver the whole of his speech, rather than the synopsis that he ended up giving us. That would have been beneficial to the whole House.
We can all agree that it is good that energy is right at the top of the political agenda and the news agenda. If one mentioned energy issues a few years ago, peoples eyes glazed over and they wondered how to get out of the conversation, whereas now it is the subject that everybody wants to talk about. People are aware that they should be doing more, but they are not sure how to do so. The public are in a state of enthusiasm with confusion. We want to encourage them to do a good deal more than is being done.
There is substantial common ground between the Opposition and the Government on climate change and security of supply, but we have concerns about the urgency with which the Government are addressing some of the issues. As the hon. Member for Alyn and Deeside (Mark Tami) said, we need to know that long-term decisions will be taken. Three years ago we had a White Paper. This year there was the energy review, leading to another White Paper next year, with a few consultations and a forum that has not met in four or five months. A solid agenda for action must emerge from the process.
Mark Tami: I accept what the hon. Gentleman says and thank him for his comments about the point that I made, but how does he set that against his partys views on nuclear power? If we are to move forward, we must make choices now, and not just say, Well wait and see; something may happen in the future, which as I understand it is Conservative party policy.
Charles Hendry: I will come to that in much more detail in due course. The Secretary of State misrepresented our position on nuclear power, as he is entitled to do, but he has said that there would be no Government subsidies for nuclear, just as we have said. It is difficult to see how in his scenario people would make investment decisions that they would not be prepared to make in ours. We have said that we do not favour nuclear power as the way of solving the problems, but we do not rule it out. If people wish to make that investment, knowing the risks involved and knowing that there will be no subsidy, they are free to do so.
Charles Hendry: I disagree with the hon. Gentleman. We wish to put the emphasis on renewables. There are extraordinary opportunities for renewables to play an enormously important part, but the primary responsibility of the Government is to keep the lights on. If that means new nuclear power stations being built, we would accept it, as a last resort. We accept that nuclear energy may have a part to play in delivering the Governments obligations.
Peter Luff: I have no wish to cause my hon. Friend any embarrassment, but ironically, Conservative party policy for an improved carbon trading mechanism and for a capacity market are more likely to bring forward nuclear power more quickly than the Governments proposals on carbon emissions trading.
Charles Hendry: As we have said, it is for industry to make decisions. The industry has told us that it can make decisions to invest in new nuclear power stations without subsidy, taking account of the full long-term cost and dealing with the long-term decommissioning and waste issues. If the industry can do that, it will be entitled to do so. We will not seek to stop it, but we make no secret of the fact that that is not our preferred option. If we can close the energy gap by using sources of renewable power, we believe that that is the better way of doing it. We also believe that that is what the public want.
The scale of the challenges facing us is immense. The International Energy Agency estimates that the worlds primary energy demand will rise by 60 per cent. between 2002 and 2030, with two thirds of that increase coming from developing countries. Last year the worlds population grew by 74 millionan increase of a little more than 1 per cent. The use of oil grew by 1.3 per cent., of gas by 3.3 per cent. and of coal by6.3 per cent. As a global community we consumed9 billion tonnes of oil equivalent. Most of us cannot envisage 9 billion tonnes of oil equivalent, but we can all agree that it is not sustainable. As demand rises, capacity in the UK will decline. Approximately 30 per cent. of the UKs existing capacity is scheduled to be retired over the next 20 years, including all nuclear power stations except Sizewell B, which will leave a significant energy gap.
Mr. Bob Blizzard (Waveney) (Lab): As the hon. Gentleman has said, about 20 per cent. of our electricity is currently generated from nuclear power, and a good number of nuclear power stations will close. Bearing in mind what the Conservative party has said in the past about not liking wind power, and given that it will take a few years until tidal and solar power are commercially developable, is it realistic for nuclear power to be a last resort?
Charles Hendry: It is entirely realistic to say that we have a preference for renewables and that we want to see what can be achieved through renewables. However, if the lights stayed on at the end of the day because of investment in new nuclear power stations, we would have to accept it. Furthermore, we are not ruling out people making their own investment decisions. If businesses want to invest, as some have indicated, on the understanding that there will be no Government subsidythey must take account of the full long-term costswe will not stop them. Our preference is absolutely clear: we want primary growth in renewables, which is the best way forward for this country.
Mr. Darling: In the next 20 years or so, it is likely that the proportion of electricity generated by nuclear will decrease from about 20 to 7 per cent. What proportion of electricity does the hon. Gentleman think can be generated by renewables over that same period, especially given that his party is committed to getting rid of the renewables obligation?
Charles Hendry: The Secretary of State is deliberately provoking me in a way in which he would not allow himself to be provoked. He has always refused to set a target on proportionsthe only exception was his target on renewables, but when it became evident that the target of 10 per cent. by 2010 would be missed, he shifted it to 20 per cent. by 2020. We do not believe in setting such targets. We are setting out a framework in which people would invest, the key to which is putting a price on carbon.
Mr. Darling: I did not ask the hon. Gentleman to set a target; I asked him a simple question. Given that the percentage of electricity generated by nuclear will be6 or 7 per cent. in 20 years time, how much more energy does he think will be generated by renewables, if that is his option of choice? He has pledged to scrap the renewables obligations that is probably the reason why we have our existing renewables.
Charles Hendry: The Secretary of State is wrong. We have pledged to reform the renewables obligation to make it fairer for all kinds of renewables. The current system particularly favours onshore wind and methane, and it needs to be restructured with additional banding to bring on stream a range of other renewables. Nobody in this country can answer the Secretary of States question, because no one knows the potential contribution of a range of technologies. If the Severn barrage is viable, it will provide 7 per cent. of our national energy needs. If carbon capture and storage can be made to work, it will give a new lease of life to coal-fired power stations. Let us see what renewables can achieve, but let us not rule out nuclear power as a last resort.
If I go on for too long, I will prevent other hon. Members from contributing, but I will take more interventions in due course. Many of the new plans worldwide are for gas-fuelled power stations, but just because someone builds a gas-fuelled power station does not mean that there will be gas to power it. Indeed, we face a critical imbalance between demand and supply of gas, and some scenarios suggest that there will be enough gas only for one quarter of planned gas-fuelled power stations.
The global threat of climate change and the imbalance between demand and supply are why Sir Nicholas Stern and Sir David King, the Governments chief scientific adviser, are right to say that doing nothing is not an option and why politicians cannot put off difficult decisions for the next generation to deal with. The next Queens Speech will include a climate change Bill. I am delighted that the Government have finally decided to introduce such a Bill in the light of Sir Nicholas Sterns report, given that all other parties have been pressing for one for some time. As always, however, the devil will be in the detail, and it remains to be seen whether the Bill includes the measures for which we, and others outside this House, have been pushing.
Although climate change is clearly one of the biggest challenges facing mankind, we must also be concerned about the affordability and security of our energy supplies. That is why in producing our energy reviews our two aims were to reduce carbon emissions and to secure our energy supplies. We have no doubt that we are on the edge of the greatest technological revolution in energy. Three years ago, the White Paper focused on how we can get more out of existing sources of supply. This time, the energy review examines how we can utilise completely new sources of energy supply, which did not seem feasible even three years ago. As a party, we are absolutely committed to renewables achieving their full potential and to a permanent change in energy policy, which will shift from energy sources that produce carbon to those that do not.
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