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30 Oct 2006 : Column 76

Michael Connarty (Linlithgow and East Falkirk) (Lab): I would hate to leave such a contradiction in the Hansard record. A minute ago, the hon. Gentleman praised the idea of a climate change Bill. Last week, the leader of the Conservative party demanded at the Dispatch Box the introduction of a Bill containing a target of a 3 per cent. reduction per annum. Five minutes ago, the hon. Gentleman said that his party does not believe in targets. Is the Conservative party demanding a climate change Bill including a 3 per cent. target, or is it against targets?

Charles Hendry: We want something that can be measured. [Interruption.] It is simple to set a range of targets. The Government have set targets on carbon so far ahead, because they know that a new Minister will be in charge by then to pick up the pieces and explain why the targets must be changed. If the climate change Bill is to have teeth and to be workable, it must be measurable. Unless we say that we want to achieve a3 per cent. reduction in emissions year on year, the outcome will not be measurable. That is not simply a public relations stunt, which sounds good one day but which, as the Minister for Energy has done recently, involves shifting the target a few years later because it cannot be met.

Mr. David Drew (Stroud) (Lab/Co-op): Returning to innovation, all hon. Members support the idea of some form of fusion, because if we are to provide the elixir of affordable energy, it is probably the best bet. Will the hon. Gentleman tell me how we can achieve a fusion-based economy without continuing to invest in the nuclear industry, the most likely route by which to achieve fusion?

Charles Hendry: Fusion is one of many technologies that have an extremely important role to play. There will continue to be an incredible amount of scientific investment in that area, which does not have to be connected to investment in nuclear power, and that investment will occur globally rather than purely domestically. We all hope that fusion will play a part, but it is 40 or 50 years away, whereas the critical energy gap is over the next 20 years.

We would require any sources of electricity generation that produce carbon to purchase carbon certificates. The number of carbon certificates would be reduced every year, so the price of carbon would rise each year, which would increase the attractiveness of investment in renewable sources of energy. Critically, we would set out the number of carbon certificates for 40 years or more to allow people to invest with certainty and confidence.

Of course, much is already happening that is very encouraging indeed. The move to renewables is no longer driven just by the relatively small group of remarkably committed enthusiasts who have driven the debate forward in recent years. The debate is now driven by some of the largest companies on the planet, and not only those that one might expect. Tesco is investing £100 million in environmental technologies in a bid to halve the amount of energy that it uses between 2000 and 2010. At the motor show, energy-efficient cars—hybrids—formed the centrepiece of every stand, which shows how car companies are
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driving the debate forward. The hon. Member for Waveney (Mr. Blizzard) led a delegation to the offshore northern seas conference in Stavanger, where the chairmen and chief executives of every major oil and company were discussing the importance of carbon capture and storage. Business, driven by consumers, is truly beginning to provide joined-up thinking.

The other key goal must be to secure energy supplies for the future. The public would rightly not forgive us if the Government could not keep the lights on, but this Government are not taking that side of energy policy seriously enough. The gas situation last winter was extremely tight. The Government’s recent energy review, however, was almost recklessly optimistic. The margin of spare capacity in our electricity system has fallen, and is set to fall further and faster. For some time we have known that our current nuclear power fleet is coming to the end of its life. Sizewell A and Dungeness A plan to close this year, and a further 7,000 MW of plant will be offline within 10 years, with only one existing station, Sizewell B, open by 2020.

Recently, the process has been accelerated. This month, British Energy announced that two of its nuclear power stations, Hunterston B and Hinckley Point B, would be shut down after cracks were discovered in the boiler tubes. The company also said that it was investigating a leak in piping at Hartlepool, that Dungeness B has issues with its fuel route, that Heysham 1 has operating temperature anomalies, that Heysham 2 is having work done on turbine bearings, and that Sizewell B is currently undergoing planned refuelling. British Energy therefore had only one nuclear power station, Torness, running at full output.

Several hon. Members rose—

Charles Hendry: I will make some progress now, and give way to hon. Gentlemen in due course.

The concern relates not just to nuclear power. The National Grid says that gas consumption has grown by 66 per cent. since 1992, and predicts that it will grow by a further 11 per cent. in the next five years. Some predict that gas will account for 60 per cent. of electricity generation in 20 years, 80 per cent. of which will be imported gas. Half our electricity would therefore depend on imported gas. If we look at some of the countries that will be the main exporters of gas in 20 years, we have every reason to be concerned. While the opening of the Langeled pipeline this autumn will reduce the tightness of gas supplies this winter, the longer-term outlook is much more worrying.

Mr. Geoffrey Robinson (Coventry, North-West) (Lab): Is the hon. Gentleman aware that the last time that we debated this issue the shadow Secretary of State expressed a much more robust view on the need for a replacement for our nuclear industry? Is he aware that his figures about the growing preponderance of gas and the decline in nuclear make it necessary to address that now if we are to provide that replacement? What do he and his party propose to do?

Charles Hendry: In that area, our policy and the Government’s are not a million miles apart. The Government have also said that they will not give subsidies, and that there will be full cost accounting to
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take care of decommissioning. Therefore, it is not clear what the Government will do in the event that nuclear power companies say, “Sorry, we cannot invest on that basis.” We are saying exactly the same as the Government—that those companies will have to invest without subsidy, and on the basis of taking full account of their long-term costs. If they cannot do so, they will not have a future role in the equation. On my understanding, the Government are saying in similar terms that they will not subsidise those companies. If that is incorrect, perhaps the Secretary of State will correct me now. If it is correct, and if those companies do not wish to invest, it is hard to see how, without breaking that pledge, those companies can be made to play the role discussed.

Mr. Darling: The hon. Gentleman is missing the point. Let us suppose that a generating company were to say to the Conservatives today, “We would like to build a nuclear power station.” Would they say, “Go away and come back when we have decided whenever the last resort arises”, or would they say yes to that company? The hon. Gentleman has sown more and more confusion as to what on earth the Conservative party’s policy is.

Charles Hendry: We have made the position absolutely clear, and I am sorry that the Secretary of State has not understood it. We have said that our clear preference is for renewable sources of energy. However, we will not stop those who wish to invest in new-build nuclear power stations without subsidy. As I shall explain, we will work to make sure that they can operate on a level playing field, because they currently have advantages and disadvantages.

Several hon. Members rose—

Charles Hendry: We have covered the matter in detail, and I shall make some progress.

Mr. Jamie Reed (Copeland) (Lab): Policy change.

Charles Hendry: There is no policy change. We have been absolutely clear throughout. We continue to say that our preference is for other forms of energy. Perhaps I should not be surprised that the comment comes from the hon. Member for Copeland (Mr. Reed), whose constituents largely work in the sector. We have been clear, however, that we would not stop companies investing their funds if they wished to do so.

The Government are not adequately prepared for the fact that, by 2015, the electricity generation gap could be 20 GW or 30 GW, which is potentially a third of current peak UK demand. We have only a limited time to push forward the building of significant numbers of new electricity-generating plants. If we are to meet our national targets and international obligations on climate change, those new generating plants must be low or zero-carbon. We accept that nuclear could have a role to play, and we agree with the Government that nuclear represents a source of low-carbon generation that contributes to our energy diversity. We do not agree with the Prime Minister and the Secretary of State, however, that it should be our first choice.

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We accept that if nuclear is to make a contribution, it should not have a particular advantage or disadvantage. That means amending planning procedures to allow for type and site approval for nuclear investment, just as planning procedures should be improved for renewable and decentralised energy sources. A level playing field also means that nuclear electricity generators will have to be totally transparent about their full lifetime costs. There will be no subsidies or special favours for nuclear. Furthermore, clarity will be needed about the methods and costs of disposing of nuclear waste. A level playing field for nuclear is the most responsible approach to meeting the strategic objectives of carbon reduction and affordable energy security. Too much emphasis on nuclear undermines the scope for realising the true potential of renewables—

Mark Tami: On that point, will the hon. Gentleman give way?

Charles Hendry: I suspect that the hon. Gentleman would intervene on any point, and make the same point as he wanted to make in the first place.

There has never been a more exciting time for new potential sources of energy. We must give each of the new technologies the chance to prove itself. We need a mindset that every aspect of renewables has a role to play, not an approach of divide and rule, setting one type against another. If we are to reduce carbon emissions by 60 per cent. by 2050, we will need more wind power. We will also need carbon capture and storage and coal gasification. We will need to tackle transport fuels. We must also have more combinedheat and power, and a fundamental shift towards decentralised energy and micro-generation. We will need much greater emphasis on energy efficiency—and, yes, perhaps we will need more nuclear in that mix. On top of that, we will need a range of technologies that no one has yet thought of or managed to develop. If we take out any of those elements, a challenging target becomes difficult, if not virtually unachievable.

Decentralised energy—generating energy near to where it will be used, and in ways that will not produce significant amounts of carbon—is perhaps one of the great energy ideas of the 21st century. Without changes to the planning rules, however, it is hard to see how it can ever achieve its full potential if it is left to the good will and altruism of developers and builders.

Thanks to new technology, we might also be on the verge of a new era not just for new sources of energy, but for old sources such as coal. Coal currently accounts for about 28 GW of the UK’s generating capacity, making up 37 per cent. of total generating capacity. However, there is no doubt about the environmental threats posed by current coal usage. New methods of exploiting coal, such as co-firing renewable biomass, are a proven and credible renewables technology option. Co-firing could help to make an annual saving of 21.5 million tonnes of CO2. Likewise, carbon capture and storage and coal gasification offer a new opportunity to exploit coal resources while containing CO2 emissions. Even the most serious carbon sources of the past might therefore play a vital role in a carbon-free future.

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Mr. David Hamilton: I am not going to raise the nuclear question. With regard to CO2 emissions, many developments are taking place, including carbon capture and piping CO2 emissions back underground. What is the view of the hon. Gentleman’s party on assisting the development of those technologies?

Charles Hendry: I think that this is one of the most exciting developments in the sector. If it can be made to work, it will transform our energy debate. In the context of our science policy, we need to discuss how to encourage “pull-through”. I am not talking just about blue-skies research; I am talking about how projects can be led to the market and made viable. We are keen to work with the industry to establish how we can best achieve that.

Carbon capture and storage can make a fundamental contribution. We must recognise, however, that so far in the development of renewable energy sources, the system has been too one-sided. The key element is the renewables obligation, which needs to be reformed. The Carbon Trust says that it is inefficient and costly, and has failed to bring on new technologies. In its present form—and the Government say that there will be no changes before 2009-10—it provides a significant incentive for methane and onshore wind farms, but it does so at the expense of other renewables technologies. Indeed, the most recent change undermined the use of biomass in co-firing in coal power stations.

The renewables obligation does not do enough to incentivise technologies such as photovoltaics and geothermal and wave and tidal generation, and it does almost nothing to stimulate research into technologies that are still at the experimental or prototype stage. If we are truly to spark a green revolution, we need to reform the renewables obligation.

Even the most enthusiastic supporter accepts that wind power suffers from a problem of intermittency. To compensate for that, we need back-up generation. In addition to a big increase in renewable generation, we shall need to maintain a level of conventional generation, using carbon capture and sequestration, to back up the contribution from wind power at times when demand is high and the wind is not blowing. The Government have no proposals to ensure that such backup generation is built or maintained, and that leaves too much to chance. Instead, we must explore the establishment of a new system of capacity payments to establish the contribution that that would make to ensuring that the lights stay on during times of fluctuating electricity capacity.

The role of Government is not just to help create new opportunities. Government must also remove obstacles that stand in the way of a vibrant renewables sector. We need to change regulation of the energy market, which may mean reform of Ofgem and making it a primary duty for Ofgem to encourage renewable sources of energy. We must sort out the issues of national grid connectivity. It cannot make sense for the National Grid to be obliged to connect facilities that will still be stuck in the planning system for years ahead of those that have already been approved. Some projects have been given connection dates 10 to 12 years ahead.
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We need to place much more emphasis on energy conservation, carrying the public with us so that they understand the contribution that they too can make in saving energy; and, of course, we must sort out planning. Planning is at the heart of the problems facing energy. Not only would it drag out the construction of a new nuclear power station for years, but it is holding up onshore wind farms across the country, stopping offshore wind from being connected to the national grid, and preventing new gas storage facilities from being built. We do not have the luxury of time on our side. We will work with the Government to develop a better system that takes account of both the vital importance of local democracy and the wider regional and national interest.

This is a timely but far too brief debate. There has not been a time in over 30 years when energy has been so much at the top of the agenda, or when the opportunities for new sources of supply have been so great. If those opportunities are to be grasped, however, the Government must truly recognise the challenges as well. They must explain how a “cap and trade” system can be established for carbon, and must start a programme to carry the public with us.

Since 1997 the Government’s actions on these issues have lagged behind their rhetoric, but the issues are too important to be made into a political football. We will work with the Government to find the best policies and direction for United Kingdom energy and climate change policy. We welcome today’s Stern report, and look forward to working with the Government where there is common ground to develop the best policies for the years ahead.

7.3 pm

Mr. Geoffrey Robinson (Coventry, North-West) (Lab): As has been observed by many Members on both sides of the House, this is an apposite occasion on which to debate energy policy, given the publication today of Sir Nicholas Stern’s report. That too has been well commented on, and—while extending my personal thanks to Sir Nicholas—I shall make only two further comments. First, it was remarkable in terms of the magisterial and authoritative tone that it brought to a difficult and complex problem. Secondly, I hope that the fervent bipartanship with which it has been received throughout the House will last as we anticipate and discuss the difficult measures that the Chancellor will no doubt introduce to give expression to the points that it makes.

The omens are not all that good: already we see the official Opposition backing away from the clear statement about the difficult issue of nuclear policy that represented their position when we last discussed it. The hon. Member for Wealden (Charles Hendry) shakes his head, but what I have said is true. The Opposition have no position whatsoever on the issue. I shall return to the nuclear issue towards the end of my speech, and the hon. Gentleman may wish to intervene then.

Mark Tami: Will my hon. Friend give way, on that subject?

Mr. Robinson: It might be easier for me to do so when I return to it. Other Labour Members might also wish to intervene then.

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