Future of Energy in Wales

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Mrs. Gillan: I thank my hon. Friend and I am glad that he did not dignify the cheap remarks made by the hon. Member for Vale of Clwyd. I have been to my hon. Friend’s constituency to see with him the dedicated work that he carries out with the energy sector there, on which he is to be congratulated. I particularly remember being impressed by our visits to the liquefied natural gas terminal and the port to look at the broader hinterland of the economy and business, all of which is dependent on a successful energy policy.
Mr. David Jones (Clwyd, West) (Con): Of course, my hon. Friend is right that Wales offers immense opportunities for the development of tidal and wave power. However, does she share my concern that the Government’s vehicle for encouraging the development of such power—the marine renewables deployment fund, which was worth £50 million—has not yet spent a single penny on the development of the technology?
Mrs. Gillan: Again, my hon. Friend has pre-empted something that I was going to say, but he makes an extremely important point. I understand that the marine technologies fund has not given out a single penny in the past four years. Is there any money to be deployed? Why has no money been deployed for the past four years? Will any of the money go to Wales and Welsh companies that are carrying out research on marine renewables, because that would be an important development?
My hon. Friend will probably agree that the solution to greening our energy is not the easy one of covering Wales with wind turbines. That concerns us all. Wind turbines could destroy the environment in some of our most beautiful areas. We need innovative and forward-looking policies, and not to take the seemingly easy option of building more wind farms in an attempt to create green credentials.
I would like to hear the Minister’s view on the Forestry Commission sites that the Assembly recently put up for bids. How much did those bids raise? What are the plans for each of the sites? Some were meant to sustain wind farm projects and projects in excess of 50 MW. What is the Government’s position on how the income from the licences is treated? Did the Assembly grant the licences on an agreed basis with the Government, given that the schemes involved were for more than 50 MW and therefore subject to a reserved power?
Chris Bryant (Rhondda) (Lab): The hon. Lady is talking about wind farms, and although I do not have an objection to how they look, they are inappropriate in certain areas and dramatically change the landscape in an inappropriate way. Last week, I visited an offshore wind farm off the east coast of England at Caister-on-Sea. Contrary to the impression given before it was built that it would have a deleterious effect on the local underwater environment, all the environmental assessments that have been made since—the wind farm has been going for four years—have been entirely positive. Is there not more room for offshore wind farms in Wales?
The Chairman: Order. Before the hon. Lady answers that question, let me tell hon. Members that she and the Secretary of State have been generous in taking interventions. If there are too many, however, hon. Members will not be able to speak later this afternoon.
Mrs. Gillan: The hon. Gentleman makes a valid point. However, we are talking about not only the environmental, but the social and economic impact that a development would have on an area. Furthermore, I think that my hon. Friend the Member for Clwyd, West might disagree with him. Some areas of the coastline in Wales are beautiful because of their tranquillity, and people visit them to look out to sea and relax. However, some offshore wind farms are imposing, and the one near Colwyn bay has raised many comments from locals. It is therefore important that local people have the opportunity to have an input. However, I am pleased that the hon. Gentleman is taking such an interest, and on his recommendation I will visit the wind farm that he mentioned.
Several hon. Members rose
Mrs. Gillan: The Chairman has admonished me for taking too many interventions. I want to make some progress and to bring my remarks to a close so that hon. Members have the opportunity to make their own speeches.
We have touched on nuclear, and the hon. Member for Ynys Môn, who speaks for Wylfa B, if I can put it in that fashion, always makes his point well. As he knows, I have also been worried about the future of Anglesey Aluminium and I therefore want the Minister to start putting some flesh on the bones of the Government’s new nuclear policy at this late stage in the day. What time scales are they discussing? When will we see the new Wylfa? We are always talking about something happening in the future, but it is taking as long to come as Christmas or next year. It has been 11 years, and there has been no commissioning. It is about time that the Minister pressed the issue on behalf of the Committee. I hope that he will be able to shed some light on what is happening.
Will the Minister also update us on the progress of Trawsfynydd? I spent a very happy visit there looking at the excellent decommissioning work being done by our operatives. When will that work be completed? What is the end game for Trawsfynydd? Is it a possible site for the future storage of other nuclear waste? There has been concern about that, and I hope that the Minister will be able to enlighten us.
On the flip side of this debate is the issue of energy efficiency. We have talked about fuel poverty, and I do not want to repeat the arguments, but I would like to reinforce that Opposition Members believe that smart meters, real-time energy read-outs, and even the ability to compare one’s bills like with like with the neighbours’, could contribute to the reduction in energy use. The new build and the new houses destined for Wales have also been picked up on, and I am worried by some of the implications of the stringent standards on a category 6 property. It has been estimated that that will add, at today’s prices, as much as £30,000 to the cost of a new property. Will the Minister confirm or deny that, and let us know what plans the Government have to ameliorate those charges?
Lastly, I once more put in my plea for smart meters and their inclusion in the Energy Bill. I hope that the Minister will take that thought away with him. That topic should be less of a political football and more of an example of all parties working together, which is how I have tried to approach my contribution. Wales has always been at the forefront of energy production for the whole of the United Kingdom, and I would like to ensure that not only do we have affordable energy for the citizens of Wales, but that they continue to play a major, important part in the energy supplies of the future.
11.12 am
Nick Ainger (Carmarthen, West and South Pembrokeshire) (Lab): I must apologise to Ministers and colleagues because unfortunately I will not be here for the winding-up speeches as I am engaged in the Treasury Committee.
The debate has been interesting, and I echo what the hon. Member for Chesham and Amersham said about the novelty of the Minister for Energy giving a statement and of our being able to ask him questions. I hope that we can replicate that in the future. The attendance this morning indicates that that was a positive move.
I will start on a local note, and then move to the global scene. The proposed RWE npower 2,000 MW power station in my constituency has been mentioned. I did not ask the Minister about that because he is about to make a decision on it. However, I ask my hon. Friend the Under-Secretary of State to raise with the Minister for Energy’s Department the need to look at the waste heat being produced by that power station and how it can be used beneficially.
I am particularly taken by a project called Thanet Earth, which uses waste heat from a combined heat and power plant to produce what is hoped will be 10 per cent. of Britain’s perishable vegetables—tomatoes, peppers and so on. That sort of use of waste heat could increase the combined heat and power of Pembroke power station. That is an extremely efficient plant, and in terms of the ratio between CO2 emissions and electricity produced, it will probably be the most efficient power station. We can add to that efficiency by using waste heat for other jobs and products.
Hon. Members have commented on the price of energy. I want to talk about that and about why we have seen, over the past 18 months or so, an unprecedented hike in crude oil and gas prices, which has had an enormous impact, and not just on our economy. The letter that had to be written yesterday by the Governor of the Bank of England was driven totally by energy prices, which have forced up the consumer price index and the retail price index. We know from our personal experience and that of our constituents the effect of those price rises at the pump and in people’s homes. As I indicated to the Minister for Energy, a 1 per cent. rise in energy prices means that another 40,000 UK citizens move into fuel poverty, spending more than 10 per cent. of their income on energy.
David T.C. Davies: Will the hon. Gentleman give way?
Nick Ainger: I am conscious of the time. If the hon. Gentleman will forgive me, perhaps he may want to come back later.
At global level, we have seen riots in India because the Indian Government have cut the subsidy for energy in that country. Currently, they are spending 2 per cent. of GDP on subsidising energy costs and the same is true in Indonesia. There are huge problems for people throughout the developing world. In addition to fuel poverty in the developing world, we are witnessing the effect on our industry of enormous price hikes. I have been connected with the oil industry for 35 years, either as a Member of Parliament or working in it previously, and I have never seen such a scenario develop before. We have had war, restriction in supply and increases in demand, but we have never before seen what happened over the past weekend, when Saudi Arabia announced that it was to increase its production by 500,000 barrels a day and the oil price went up. Something else is driving the price rises.
I referred my hon. Friend the Minister for Energy to the report produced by the Senate Permanent Sub-Committee on Investigations, “The Role of Market Speculation in Rising Oil and Gas Prices”, which was produced in June 2006. There seems to be overwhelming evidence that the conventional wisdom of supply outstripping demand does not apply. The evidence is quite the reverse. The US Department of Energy’s Energy Information Administration recently forecast that in the next few years, global surplus production capacity would continue to grow between 3 million and 5 million barrels a day by 2010, thereby
“substantially thickening the surplus capacity cushion”.
I watched a TV interview with the Iraqi Oil Minister yesterday. Due to the work that has gone on with the coalition forces and the Iraqi security forces, Iraqi oil production has now gone from 1.7 billion barrels a day to 2.5 billion, a significant increase. There have also been significant increases announced by Saudi Arabia. The fact is that for the past eight years, we have never seen such high levels of crude oil stored in refineries in America and in Europe. What is driving the oil price? The Iraqi Oil Minister and Sheikh Yamani, whom many remember as the Saudi Oil Minister in the 1970s and ’80s when we had the huge rises, totally agree that it is speculation. That is why I come back to the Senate Committee.
David T.C. Davies: The hon. Gentleman is right, but the Minister has put in paragraph 5 that this is a problem of supply and demand, yet as the hon. Gentleman has rightly said, it is not.
Nick Ainger: As I have said, that is the conventional wisdom. I have a document that was produced by the Treasury only a few days ago, which states that
“prices are expected to remain higher than historical real averages due to increased costs of production, tightness in input markets and increasing geological complexity of oil fields.”
I do not agree, nor does the Senate Committee, and I hope that in its inquiry the Select Committee on Business, Enterprise and Regulatory Reform will agree with me that there is no justification for the rise in prices other than speculation.
The Senate Committee highlighted the fact that when the change occurred at the end of 2005 and the beginning of 2006 and the intercontinental exchange futures market went global, at the same time unregulated trading of an electronic nature suddenly developed. Major hedge funds and banks such as Goldman Sachs, JPMorgan Chase and Citigroup suddenly got into major commodity trading. Significantly, that was at the time when they realised that something was going wrong with their other wonderful market for making money—collateralised debt obligations. We ended up with a credit crunch because of the failures in that. My fear is that unless we start regulating the oil trade market properly, we will end up with an energy crunch; in fact, I think that we are almost there.
I asked the Minister to get hold of the Financial Services Authority because it is the regulatory body for the intercontinental futures exchange and it needs to get a grip on electronic trading because that is what forces up the price—I will explain how that works in the few minutes that I have left. Basically, before the major hedge funds and banks became involved in the market, trading was between producers and refiners. They realised that there was an opportunity to make considerable amounts of money and a third party entered, which created another market—the futures market. A refiner and Mr. Goldman Sachs can bid for the same barrel of oil, which forces up the price. It is paper oil. The oil industry reacts by getting extremely worried about the price of future oil, and it starts hoarding, which is why we have some of the highest crude oil inventories throughout the developed world; the industry is hedging its bets against the rise in the price of crude.
Mr. Roger Williams (Brecon and Radnorshire) (LD): The hon. Gentleman has introduced an interesting analysis, but, in the end, Mr. Goldman Sachs does not want a barrel of oil; he has to sell it because he does not want delivery. Surely there is a self-fulfilling solution to the problem, if it is based on the principles that the hon. Gentleman is explaining.
Nick Ainger: I would love to see an oil price crash. I believe that if the market was operating properly—on supply and demand—we would not have a price of $130 a barrel, but $50 a barrel. Supply and demand, at the moment and in the medium term, are in balance. We should not forget that biofuels are coming in, which are a substitute, as well as new supplies of liquefied natural gas.
Lembit Öpik: rose—
Nick Ainger: I hope that the hon. Gentleman will forgive me, but I am conscious that I have to finish by 11.25 because I cannot come back.
We—Governments and Parliaments throughout the world—seem to be accepting that we have to have massive hikes in energy prices and their effects on our economies and on our individual constituents. However, if we regulate the market properly, which is trading in the most important commodity in the world at the moment, we can address that fundamental problem. We will not completely get rid of the damage being done to our economies and, in many cases, to elderly and vulnerable people, but it will certainly be moderated substantially. I hope that my hon. Friend the Under-Secretary, in winding up, will assure me that he will take the issue to the heart of Government and will ensure that we regulate the intercontinental futures exchange properly and do not allow this scandalous speculation to continue, and that we recognise that something can be done about the damage.
It being twenty-five minutes past Eleven o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at Two o’clock.

Questions Not Answered Orally

The Secretary of State was asked—

Crime Levels

10. Alun Michael: What discussions he has had with the Home Secretary on measures to cut crime and increase public safety in Wales, with particular reference to the lessons learned from the Cardiff violence reduction strategy. [210780]
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