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9.15 pm
Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): We all agree that energy security will be one of the dominant political themes of the century. The debate is therefore timely. As someone who is fairly new to the subject, it appears to me that much of the way in which the debate is framed and perceived is incomplete, unbalanced and too alarmist and could lead to some dangerous or unhealthy policy outcomes.
First, the debate is too concerned about imports. I was interested by the comments of the hon. Member for Cambridge (David Howarth) about the fear of fuel imports. They were surprising, given the Liberal Democrats’ role in Wales in whipping up alarmist worries about imported liquefied natural gas. Nevertheless, he provided an important insight. In the UK, a less than rational
fear exists about becoming dependent on imported fuel. In a simple paradigm, imports are viewed as bad, creating dependency and therefore vulnerability, and subject to supply interruptions; and indigenous suppliers are perceived as good and enhancing energy security. That analysis is flawed and too simplistic.
We should remember that import reliance is the norm for many of our European neighbours. At times, we underestimate the resilience of commercial relationships in overcoming political difficulties. During some frosty periods in the cold war, when millions of men and missiles faced each other across central Europe, gas continued to flow westwards from the Soviet Union to fulfil demand in central and western Europe.
Algeria was mentioned as a potentially unstable source of imported gas for the UK, yet it has proved a reliable trading partner for many countries that buy its gas. Although an industrial accident happened there a few years ago, causing a possible interruption to its liquefied natural gas contracts, it fulfilled all its gas contracts through swaps and using pipeline gas. We should not fear imported fuel too much.
The hon. Member for Coventry, North-West (Mr. Robinson) asked what would have happened last winter without our indigenous coal industry. It is an important question. I am no enemy of our indigenous coal suppliers, but the upswing in demand last winter was met by imported coal. Suppliers came from Russia, South Africa, Australia, Colombia—literally the four corners of the earth. That does not appear unhealthy to me. Indeed, it enhances security of coal supply. We have a stable and diverse supply base of coal for UK power generation. Surely stability, dependability and diversity of supply are the essence of energy security. I am confident that the same position will emerge in time for imported gas.
The current energy security debate also focuses too much on political risk. Many risks affect the supply chain. We all witnessed the impact of hurricane Katrina on world oil markets. Risks to the supply chain can come from natural disasters, human error or system error, as happened at Buncefield. There is a range of other risks as well as geopolitical risks.
Our debate focuses too much on upstream operations and does not assess the full range of risk throughout the supply chain. It is worth reminding ourselves that the last genuinely serious emergency to do with fuel supplies occurred in September 2000 through fuel protests. That highlighted significant vulnerability in this country. That came at the end-point of the supply chain, but we are still overly focused on political risks in the middle east, in Russia and in other countries.
I have huge faith that the markets will deliver the new capacity to meet the shortfall potentially created by the decline in our indigenous gas, oil and coal supplies. A good example is what is happening with respect to liquefied natural gas, which is bringing a major enhancement to our energy security. There are LNG projects on the eastern coast of Britain at Teesside and the Isle of Grain and also crucially in west Wales with two projects, South Hook and Dragon, which happen to be in my constituency. When fully operational, they have the potential to bring in about 30 per cent. of the UK’s gas capacity.
As an island, the UK is particularly well placed to benefit from LNG import terminals. Does LNG create new dependency arrangements? Yes, obviously. Does it create new vulnerabilities? Not necessarily. The hon. Member for Cambridge mentioned international trade and hinted that it is all about creating mutual dependencies, which is surely a good thing. The UK’s new LNG infrastructure creates new flexibility in our energy system and new opportunities and options that will be an extremely important part of our emerging energy mix in the decades ahead.
My one area of concern is about storage and the adequacy of our strategic storage capacity. Storage obviously plays a crucial role in helping the nation withstand supply shocks and catastrophic interruptions in supply. It also helps to calm market fears when the markets can see that there is an availability of buffer capacity and a willingness on the part of the Government to use it.
My concerns relate to a number of questions. First, what is an adequate buffer of emergency stocks? Do we have adequate stocks and, if not, why not? Are there any limitations on the market in delivering the spare capacity that we need? The biggest concern is gas. Ample new import terminals and other infrastructure are being built. and there are some new commercial storage projects in the pipeline—for want of a better phrase—but I am not sure what new strategic storage capacity for natural gas there is. As I understand the current position, we have about two weeks of stored gas supply, whereas the European average is nearer two months. I have no idea what the optimum level should be, but I hope that the Minister and his team are looking into those questions and assessing the level of storage capacity that we need as we become increasingly reliant on gas imports. As imports grow, it is increasingly anomalous that there is no mandatory stocking requirement for natural gas as there is for crude oil and petroleum products.
My concern with the stocking regime for oil and crude products is partly similar to my concern over gas. The same basic question applies: as we increasinglyrely on imports, how adequate are the current arrangements for ensuring a necessary buffer? On the face of it, things look reasonably healthy and we seem to have no overall problem in meeting our compulsory stocking-up obligations under the relevant EU directive. However, it is also true that over recent years we have struggled to meet our compulsory stocking obligations for category 2 products—diesel, kerosene and aviation fuel, for which there is increasing demand. In three of the past four years, we really struggled to meet the stocking obligations for those products. Furthermore, we currently benefit from a 25 per cent. derogation under the EU directive, as we have been a net exporter of crude oil and petroleum products over the past 20 years, but as we move away from that position, the derogation will be phased out. What thinking is going into ascertaining the additional storage that we will need as the derogation is phased out?
Then there is the question of the extent to which we rely on other countries overseas to help us meet our stocking obligations. Currently, about 15 per cent. of our compulsory stocks held under the EU directive are actually held in foreign countries—a trend that has
been increasing, so I would welcome the Minister’s thoughts. Does he envisage a prudent level above which we should not go in relying on other countries to hold our strategic stocks?
Those are some of my concerns. In common with my hon. Friend the Member for Mid-Worcestershire (Peter Luff), I am pretty confident about the emerging gas situation and relaxed about energy imports. I have great faith in the markets to deliver a new infrastructure. There are problems around planning, but it is the particular problems surrounding storage that require attention now.
9.24 pm
Mr. Mark Prisk (Hertford and Stortford) (Con): Today's debate has been timely and, indeed, informed. The Secretary of State opened by quoting his good friend the Chancellor, who apparently said today that the United Kingdom must be both pro-growth and pro-green—sentiments with which we agree. The Secretary of State went on to talk about gas prices and promised that Ofgem would monitor them very closely. We trust that it will do so, and we will hold him to that promise. He mentioned the fact that the White Paper, which was due, as he said, at the turn of the year, will appear in March. Clearly, climate change is delaying not just the seasons but Government publications.
My hon. Friend the Member for Wealden (Charles Hendry) gave an excellent commentary on the Stern review. I confess that I have not read every one of the 700 pages of that document, and I trust that it was printed on recycled paper, but what is important is that the summary that we have been able to see in the House is thoughtful and considered. We on the Conservative Benches will wish to look at that with some care. My hon. Friend went on to give a thorough exposition of the emerging technologies for future power generation and how they can help both to reduce carbon emissions and to secure future energy supplies.
The hon. Member for Coventry, North-West (Mr. Robinson) expressed a number of concerns. He had some serious concerns about the slow pace of the Government on renewables, but he is a loyal member of his party and I do not think that he wished to press his concerns too far.
The hon. Member for Cambridge (David Howarth) speaks, I believe, for the Liberal Democrats, and I must say that they got their money’s worth this evening. He emphasised carbon-free generation and he was rather sceptical about quite a few of the technologies. He seemed to work his way through a number of reasons for various things not working, including fusion and carbon capture and storage.
We heard a wide-ranging and interesting contribution from the hon. Member for Waveney (Mr. Blizzard). He committed himself to reduce his own energy consumption by, I believe, 20 per cent. as part of this week's Energy Saving Trust campaign. Good for him.
I missed the opening remarks of my hon. Friend the Member for Mid-Worcestershire (Peter Luff), which I regret because what I did hear was not only an informed speech but a balanced and excellent contribution, without wishing to embarrass him too much. His contributions show not only that he
understands the subject but that he is able to express his points to those of us who are perhaps not as informed. That is one of his great successes. He particularly raised two points, and I hope that the Minister will respond to them: first, the challenge of putting a price on carbon and, secondly, how we sort out the planning system in relation to that.
The right hon. Member for Oldham, West and Royton (Mr. Meacher) set out his anti-nuclear credentials thoroughly and promoted the case for wind farms. My hon. Friend the Member for Salisbury (Robert Key)—sadly, he is not in his place at the moment—gave a typically robust and powerful case for making technology help to solve the problems in energy. Of course, as always, he is a powerful advocate of nuclear power.
The hon. Member for Selby (Mr. Grogan) wanted clean-coal technology to be given a chance. I suspect that the Minister listened carefully to his remarks. Last and by no means least, my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb) did a rare thing: he sat and listened to the debate and gave an intelligent and carefully reasoned response to the contributions of others. It was an excellent contribution and I am sure that it is one that the authorities have noted with care—that has got him worried now.
Securing our national energy supply is, of course, going to be, as we have heard, one of the most significant challenges for this and future Governments. It is both an international and a domestic challenge. Internationally, the picture is one of growth in global demand outstripping supply, compounded by significant political risks in the energy-rich regions of the world. As my hon. Friend the Member for Wealden said, last year alone the world's population grew by over 74 million people—that is 1 per cent. in 12 months. Meanwhile, the use of fossil fuels grows even faster—up 1.3 per cent. for oil, 3.3 per cent. for gas and 6.3 per cent. for coal. Looking further ahead, oil demand is predicted to reach 120 million barrels a day by 2025. China’s demand alone will triple by then, never mind the impact of India or other rapidly advancing countries.
Unfortunately, just as demand for energy is rising, so the levels of political uncertainty have increased. It is, as some have said, a rich irony that the easiest to reach supplies of fuel happen to be located in some of the most difficult areas politically. Geology and politics seem to have conspired against us. For example, today 58 per cent. of China’s oil imports come from the middle east, and that is expected to rise to 70 per cent. by 2015. Thus the new engine of global growth is hugely dependent on the stability of the middle east. What happens will affect us all. Nor should we ignore the transit countries through which the gas must flow, or the sea lanes through which the oil must be shipped. Choke points include the straits of Hormuz, the Panama canal and the Bab el Mandeb strait, at the entrance to the Red sea. The security of those transit routes and oil refineries will affect our energy supplies now and in the future. Ironically, it was Osama bin Laden who recently called oil refineries the “hinges” of the world economy. We must ensure that they remain open.
It is that international combination of economic and geopolitical risks that has changed the debate about supplying our future energy needs. The recent surge in
demand for gas—and the accompanying soaring gas prices—is a symptom of what we face.
The truth is that in the UK the margin of spare capacity in our system has narrowed in recent years and, as we have heard today, is set to shrink further and faster. We have heard from several hon. Members how the current generation of nuclear power stations is coming to the end of its life, leaving just Sizewell B open by the mid-2020s. The recent news about Hinkley Point B suggests that we may not even have that long. Some experts are predicting that by 2015 up to 30 GW of current generation may be lost—the equivalent of a third of our current demand. Given that, does the Minister still believe that his policies will close that gap? In which year does he expect to see new generation plant first come on stream?
During the debate we have heard about the need for a comprehensive approach to our future energy supply. We need both to diversify our sources of energy and to ensure that we use it more efficiently.
Michael Connarty: I compliment the hon. Gentleman on his line of thought, which I am following, but I anticipated that he would tell us about the Opposition’s policies on the nuclear question. I am the secretary of the all-party group on nuclear energy. I was anti-nuclear when I entered the House, but the desperate plight caused by climate change has changed my mind. However, the Conservatives appear unwilling to take the step necessary to commit us to rebuilding our nuclear capacity at least to what it was before—some 29 per cent.
Mr. Prisk: The hon. Gentleman must not have been listening at the beginning of the debate. I am sorry for that, because he usually makes a positive contribution. It is clear that nuclear will have its place, but that will not be first place. We have made that clear, and I do not need to rehearse it any further.
The Conservatives believe that in seeking to encourage more electricity generating plant, we must ensure that much of that plant uses low-carbon technology. To do that we need to reform—not remove, as the Secretary of State suggested incorrectly, I am sure, earlier—the renewables obligation. That means not relying simply on wind farms, but trying to incentivise a whole range of emerging technologies, including wave and tidal power, and photovoltaics.
Equally, the Government need to show leadership. They originally set themselves a target of 10 per cent. of UK electricity coming from renewables by 2010. As potential failure on that target loomed, they moved the goalposts to 20 per cent. by 2020. What confidence can we have that they will not repeat that trick? Does the Minister accept that delaying matters by a decade sends the very worst signal about the Government’s true intentions? The issue is here and now, and we would therefore urge the Government seriously to consider reforming the renewables obligation actively to encourage the next generation of green technologies. I hope that the Minister will be able to respond positively about that when he replies to the debate.
Renewables are not the only answer. We have an open mind about how conventional fuels can be adapted and used; for example, if clean coal technology can be made to work and meet our environmental objectives, it can and should have a part to play in our future generation. The hon. Member for Waveney said that we must use our energy much more efficiently. He is right. The UK is the worst country in Europe for wasting energy, according to the Energy Saving Trust. It predicts that by 2010, unless we curb our current habits, we shall have wasted £11 billion and about 43 million tonnes of carbon dioxide—equivalent to the annual emissions of more than 7 million homes. Given that fact, it is clear that we have a shared responsibility to change bad habits and reduce the energy we waste.
Greater energy efficiency can benefit us all. Consumers can save their hard-earned money, businesses can reduce their overheads, the environment will benefit from reduced carbon dioxide emissions and, nationally, we can benefit by reducing our overall energy demand and thus our dependency on foreign supplies. That is why in this, energy saving week, and following the lead of the hon. Member for Waveney, I, too, have committed to reducing my energy use by 20 per cent., as have many of my colleagues on the Opposition Benches. When the Minister responds, will he tell us whether he and his Department have also made the same commitment and is it shared across each Whitehall Department and every Government agency?
For much of the last century, this country has been self-sufficient in electricity generation, but as the debate has highlighted, all that is about to change dramatically. By the Government’s own estimate, we could be reliant on overseas resources for up to 80 per cent. of our electricity by 2020. If global demands for energy were static, or the middle east were tranquil and stable, that new possible dependency might not be so concerning, but given the economic and political realities we face, ensuring that our electricity generation is secure requires comprehensive and urgent Government action. As I said earlier, we have a shared responsibility, but the current Government must lead the way.
The Government need to lead us in becoming energy efficient in our homes and at work. They need to enable the rapid development of renewable technologies, and to remove the barriers to local generation. If we are to fill the gap left by ageing power plants, they need to act quickly by creating the right market incentives. Overseas, they need to forge strategic partnerships with energy-rich nations to secure supplies for future generations in this country.
The Government should know that if they act promptly and effectively they will have our support and that of the majority of the House. But we need to hear that Ministers understand both the scale and the urgency of the task ahead, and that they have both the strategy and the will to lead the way.
9.38 pm
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