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30 Oct 2006 : Column 82

We understand, of course, why the shadow Secretary of State cannot be present, and we make no comment about that; but he certainly applied an entirely different emphasis from that applied by the hon. Member for Wealden. When the hon. Gentleman talked of replacing targets with something that could be measured, we observed the linguistic contortions. Indeed, the Whips are already descending to try to explain the inexplicable—that is, the absence of Conservative policy on this issue.

I want to pose a few questions to my right hon. Friend the Secretary of State, who has led us so well through the difficulties that we have encountered in facing up to the problems of obtaining competitive, secure energy and diverse supplies while fulfilling our commitments on emissions and meeting climate change requirements. It was good to hear—although I am not sure that I heard my right hon. Friend correctly—that we may still be self-sufficient overall in energy. The figures in the third of the reference tables provided by the Department are for 2003. That is quite a long time ago, given that we are meant to report to the House on these matters annually. Are there any more up-to-date figures? It would be interesting to know whether we already have a significant deficit in our energy requirements.

I should also like the Secretary of State to tell us more about the prospects for gas, as and when he can. I should like to know what is happening in the western approaches, as well as to the north and west of the Shetlands. There has been a huge rise in the prices of oil and gas. Is there a chance that they will become increasingly economical? Are the prospects as good as we might reasonably expect? If so, when might we realistically see some entirely new sources come onstream?

The commitment to maximise renewable sources as far as humanly possible remains in all parts of the House. We are currently extremely well endowed in wind terms in the United Kingdom, in Ireland and off the north coast of Europe. I seem to remember the Secretary of State’s predecessor telling us, when he presented the last energy review in 2003 from the Dispatch Box, that we had some 30 per cent. of western Europe’s wind resources. That is an enormous potential for us to exploit. It is expensive, of course, and we have a huge task ahead of us in reaching our 20 per cent. target by 2020. As we keep pointing out, that represents a fivefold increase, and we are not achieving such a rate of increase yet.

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

Mr. Robinson: I will give way to my hon. Friend on both points in a second.

Is there anything more that we can do? Can my right hon. Friend tell us whether the present 10 per cent. subsidy—about £1 billion a year—for renewables, presumably mainly for wind, will be geared either up or down as we approach 20 per cent.? Is a £2 billion subsidy projected for that stage? We must clearly pay a price for renewables, and I hope that Opposition Members will make up their minds and say that they are prepared to face that price.

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Mark Tami: My hon. Friend makes the important point that it is a case not just of building new nuclear power stations but of building them to compensate for the stations that will be lost. If we are not to have nuclear power and renewables are to fill the gap, it will be a very big gap to fill.

What does my hon. Friend think of the Opposition parties? While they talk green, they tend to campaign locally against wind turbines whenever they are proposed—particularly the Tories in north Wales.

Mr. Robinson: My hon. Friend, characteristically, hits the nail on the head. As those of us who have campaigned in by-elections and other local elections know, that applies particularly to the Liberals, who are extremely good at espousing policies nationally that they then disown locally. What I think about the Opposition in general is better not said in this House, but on this issue the way in which they have chosen to sit so uncomfortably on the fence will be evident to everybody, particularly to those who have come to the difficult conclusion that we have no alternative but to embark on a replacement policy for the nuclear sector.

Before coming to that, I want to mention coal and to recall my experience at the Treasury in that context. Not so very long ago—barely six or seven years ago—the Treasury and most Government Departments were intent on closing every ounce of coal-fired generation. I ask my hon. Friends where we would have been last year without the coal capacity that we had. If, as has been suggested, 38 per cent. of generating capacity is coal-fired, what level is projected for that, and over what period? Linked to that, what level of excess capacity do the Government think it prudent to have in the supply sector? Given that it must be a significant percentage, what figure, albeit in broad terms, do they have in mind?

Those of us who have supported the difficult decision to go forward with the nuclear programme also subscribe to the concept of the level playing field. There should be no subsidy for nuclear, so those in the private sector must come up with programmes that show that this can be done.

Charles Hendry: What if they do not?

Mr. Robinson: The hon. Member for Wealden says that it cannot be done, so the Conservatives must be against it. Why do not they stand up and say, “We don’t believe in the nuclear option”? Why do not they have the courage of their convictions?

Charles Hendry: I said, “What if they do not?” In other words, what happens if the private sector does not invest on that basis?

Mr. Robinson: I understand that it is likely to make proposals that show that it can be done. In any objective and honest assessment, there is no reason why not, given the projections for gas prices and the costs that arise as we get into the more difficult areas of renewable generation. We naturally cherry-pick the best areas for the current situation. The capacity is still there, but as with other areas of supply, as one develops its potential the difficulties of extending it become greater, as, usually, do the costs. The Opposition have not given us a clear
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statement of their policy, which is what we are aching for. They flunked the issue when they called off their policy review and came out with an interim review, and they have flunked it ever since. It would have been a much happier situation for the whole House if the shadow Secretary of State, who came out as more firmly in favour than we were ahead of the review on nuclear, was here to make their policy clear.

Peter Luff: I am genuinely interested to know whether the hon. Gentleman thinks that the Government’s proposals on carbon trading, as they stand, are sufficient to achieve commercially viable nuclear power stations.

Mr. Robinson: I do not want to make it difficult for my right hon. Friend the Secretary of State or for my hon. Friend the Minister for Energy, who will wind up the debate, but I do not know whether the private sector will make proposals on the basis of base load. I am out of date on that concept; does it still apply? I was heavily involved in it during the energy review that was undertaken at the time of my leadership in the Treasury. About 20 or 30 per cent. of energy was called up automatically and maintained on base load. I am not sure whether that is still intended to be the case, or, if so, whether a fixed price will be established for it. I do not think that there would be any element of subsidy, but I am not sure how a nuclear power plant could be operated without it. It is not like a coal plant. Coal is the best fuel to call up in an emergency. It can be flamed up—I think that that was the phrase—very quickly for capacity at peak demand periods. Clearly, nuclear is not suited to that. Gas is less suited to it, although we brought on new gas plants with that guarantee. If there is base load, will it be against a fixed price? If so, and it is a competitive price, it seems to me that the private sector has an assurance against which it can quote and make proposals that, contrary to what the hon. Member for Wealden said, can be made commercially realistic.

With the new nuclear programme coming on-stream, and ahead of the decommissioning of the existing plants, is it any part of the Government’s review to look again at the superconductor arrangement with the French? When we last debated it—I have brought it up from time to time in the House—we were still paying a very stiff premium to the French to have this standby capacity, which we paid for whether we used it or not. Indeed, if we used more than the prescribed minimum capacity that the French would hold available for us, we would pay a super-price way above the basic price to which we were already committed. I should reassure my hon. Friend the Minister that I do not expect an answer this evening, but at some point the House will need to know on what basis the private sector is being asked to quote for a new nuclear programme and whether, or when, we can disentangle ourselves from the very expensive French superconductor agreement. I say that because table 1 in the papers produced for the debate implies that the units of energy that we import are more expensive than those that we export. That does not seem to be good business and could be a reflection of our superconductor arrangement with the French.

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I will be grateful to my hon. Friend the Minister if he can deal with some of those questions when he winds up, or, if not, in the course of future debates.

Peter Luff: On a point of order, Mr. Deputy Speaker. If papers have been made available to some Members, I am not aware of what they are and I would very much like to see them.

Mr. Robinson: Further to that point of order, Mr. Deputy Speaker. The table that I mentioned uses figures from the DTI’s “Digest of UK energy statistics 2005” and “Energy Trends quarterly table 1.3”. They have all been published and are available to the hon. Gentleman if he would care to go to the Library and get them.

Mr. Deputy Speaker (Sir Michael Lord): I am grateful to the hon. Gentleman for dealing with that point of order so efficiently.

7.18 pm

David Howarth (Cambridge) (LD): As previous speakers have said, this is an auspicious day to be discussing energy supply, since it is the day on which the Stern review was published, and it has been announced that the Government are to introduce a climate change Bill. Of course, the debate on that Bill will be on its content, not on its mere existence. It is important that we realise what radical changes need to be made in energy policy in order to meet the challenges that Sir Nicholas Stern describes, and any realistic climate change Bill will have to take that into account.

Climate change must be the first priority as regards energy policy. That means fundamentally changing what Ofgem does and how the market works. For example, in the electricity market, power stations currently come on stream simply because of their cost of generating electricity. That ignores carbon and the climate change consequences of generating electricity in different ways.

We need to develop a regulatory framework in which Ofgem brings into the electricity generating system forms of generation according to how cheaply they save carbon, not simply how much they cost. That will radically change the way in which the electricity generating system works. It will bring on renewables quickly. It will also create a position whereby gas clearly has an advantage over coal. Although I have great sympathy with the comments of hon. Members who represent mining seats—my grandfather was a coal miner—the coal industry must face up to the carbon consequences of generating electricity through coal. The introduction of such a radical change to the way in which the system works will provide the boost that the coal and generating industries need to introduce technologies such as carbon capture and storage. Coal can compete with gas and renewables only on that basis.

Mr. Blizzard: If, under the policy that the hon. Gentleman describes, the nuclear industry stepped up to the plate and could deliver carbon-free energy at a price as competitive as that of offshore wind or solar power, while oil and gas prices spiked or remained extremely high, would he tell it to go away?

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David Howarth: I shall explain shortly why Liberal Democrats remain fundamentally opposed to nuclear, although nuclear power could not come on stream in the scenario of a gas spike that the hon. Gentleman describes because of the points that the hon. Member for Coventry, North-West (Mr. Robinson) made about base load. Nuclear power is fundamentally a base-load technology; it cannot operate economically in a flexible or variable way.

Mr. Blizzard: I did not mean a spike in the sense of a sudden surge, but a position in which gas prices remained permanently high.

David Howarth: I thank the hon. Gentleman for that clarification and I shall explain Liberal Democrats’ fundamental opposition to nuclear power later. However, before I do that, I stress that the cheapest, most effective and efficient way to save carbon is through energy saving rather than any specific mode of generating electricity. For that, we must consider a range of policy options, including product standards and building regulations as well as a review of the operation of the energy efficiency commitment.

In the energy review, the Government were interested in a “cap and trade” system for energy efficiency, whereby the energy supply companies would be under an obligation to reduce the average amount of energy that their customers use. Companies’ current incentive is to sell as much energy as possible to their customers. A requirement to reduce average energy use, coupled with the ability to sell any excess to other companies, would constitute an economically efficient way of operating. I am interested to know whether the Government believe that that system will progress from the energy review to the White Paper.

Other speakers mentioned decentralised energy, and we should realise the importance of that to the country’s energy generating system. Combined heat and power and microgeneration at household and district levels have vast potential—they could provide up to 30 or 40 per cent. of the country’s electricity requirements. Even when microgeneration and combined heat and power are gas based, their method of producing heat as well as electricity means that they are more efficient in their use of gas than a system of separating a housing heating system from an electricity generating system. Combined heat and power and microgeneration also reduce transmission losses that occur between the power station and the user. Even microgeneration and combined heat and power that use gas produce a massive carbon benefit by effectively doubling the efficiency of its usage.

Peter Luff: Over what time scale does the hon. Gentleman believe that decentralised energy could make the contribution of 30 to 40 per cent. that he mentioned?

David Howarth: I believe that it would take 30 years to reach that percentage, but steady progress can be made towards the target. Much of the progress would be front-loaded because many cheap projects can be introduced much earlier, but it would take place over a generation.

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However, we must make decisions now—not in a generation—about the way in which the national grid works. Decentralised energy works on a different sort of grid from that of the current centralised energy system. The output of nuclear power, which is a base-load system, cannot be varied economically. Decentralised energy requires a different system, whereby power can move both ways and in which the central generating capacity must be enormously flexible to meet the variations in output of a dencentralised energy system. Without that flexibility, a decentralised energy system cannot work. The nuclear option effectively rules out a decentralised energy system. In engineering terms, it is possible to have both systems at once, but that is enormously expensive and such a system could not work economically. The central element of the decentralised system would continue to exist but central capacity would be different from the current base load.

Peter Luff: The evidence that the Select Committee has heard so far suggests that the major impact of decentralised generation would be not on the national grid but on local distribution networks, which are perfectly able to deal with the challenge of micro-generation.

David Howarth: The hon. Gentleman is right when small amounts of decentralised energy are on the grid, but when we reach the sort of percentages that I mentioned, a different sort of engineering is needed. We face a problem when the grid needs to be renewed. It works on a 50-year cycle and we are reaching the end of it. We need to make decisions now about the next 50 years. If it were possible to do as the hon. Gentleman suggests, we would leave the matter for 30 years and then decide. However, we cannot do that because we are in a part of the cycle when we need to decide.

Our objections to nuclear power remain fundamental. In any scenario, nuclear cannot come on stream for approximately 10 or 12 years, even if the Government lifted many of the planning barriers. The planning period for a nuclear power station is now 17 years. During that time, generating capacity from nuclear tends to come out of the existing system, as hon. Members of all parties have said. Whatever we do in the next 10 to 15 years, we will need energy from non-nuclear sources. Arguments that depend on nuclear suddenly appearing as if by magic to fill a gap in the next 10 to 15 years simply do not answer the question.

Nuclear power is also expensive and its subsidies tend to be hidden. The nuclear industry tends to present proposals and say that subsidies are not needed. However, after a time, it says, “Our costs and time scales are overrunning but the project is so big and important for the energy generating system that it can’t be allowed to fail so you, the Government, must help us.” More and more help is subsequently needed. Nuclear power locks itself into the system. It may start without subsidies but they eventually arise.

When I was first elected, I attended a debate on the Queen’s Speech that included a short set of comments on nuclear power. Hon. Members who supported nuclear power pointed to the Finnish experience, where a nuclear power station was being financed purely by
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the private sector. I was privileged to visit Finland to talk about its nuclear power stations, and I found that, in reality, there were various enormous Government subsidies hidden in its production. It was not really a private sector project at all. In fact, the consortium building that power plant includes among its members the city of Helsinki and a state-owned Finnish electricity company. The project is now way over budget and way over schedule. That, I believe, will be the future of any nuclear programme in this country. It will not be introduced in the optimistic fashion that its proponents contend. Eventually, the nuclear industry will come to the Government and ask for its usual subsidies.

Robert Key: I, too, have been privileged to go to Finland and talk to the Finnish Government and Finnish politicians, trade unionists, engineers and scientists. I have seen the plants and gone down the waste facility that is being built. What the hon. Gentleman describes is, if I may say so, only half the story. What the partners investing in the project are contributing is a 60-year cycle of investment, ending in no subsidy for waste disposal, and the ownership ofthe means of production by the consumers of the electricity produced. That is an entirely different scenario, which does not match what the hon. Gentleman is trying to tell the House.

David Howarth: The two accounts are not entirely incompatible, though the interpretation certainly is. The long-term contracts being granted to make the Finnish project work are partly contracts from the state, because the partners include state entities. In my view, that still amounts to state subsidy. On waste, the 60-year period to which the hon. Gentleman referred is correct, but after that period the Finnish state takes responsibility for waste. Admittedly, a lot of the cost will be borne by the industry, but not all of it.

Another reason for opposing nuclear has already been pointed out: it will crowd out investment in other forms of energy production, including the large-scale renewable projects such as the barrage and tidal schemes that are currently envisaged. That has also been the experience in Finland: investment in renewables has not flourished since the Government took the decision to go nuclear. Finland’s experience is also that energy saving is going into reverse since that decision was taken.

The next reason for being against nuclear is that it remains a security problem. Nuclear power is the only form of energy that requires its own police force, the only form that is a plausible target for terrorism.

Robert Key: Nonsense.

David Howarth: The hon. Gentleman says, “Nonsense”, but how many terrorists have targeted windmills in the past couple of years?

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