The
Committee consisted of the following
Members:
Chairman:
Mr.
Peter
Atkinson
Ainger,
Nick
(Carmarthen, West and South Pembrokeshire)
(Lab)
Brennan,
Kevin
(Cardiff,
West)Bryant,
Chris
(Rhondda)
(Lab)
Caton,
Mr. Martin
(Gower)
(Lab)
Clwyd,
Ann
(Cynon Valley)
(Lab)
Crabb,
Mr. Stephen
(Preseli Pembrokeshire)
(Con)
David,
Mr. Wayne
(Caerphilly)
(Lab)
Davies,
Mr. Dai
(Blaenau Gwent)
(Ind)
Davies,
David T.C.
(Monmouth)
(Con)
Flynn,
Paul
(Newport, West)
(Lab)
Francis,
Dr. Hywel
(Aberavon)
(Lab)
Gillan,
Mrs. Cheryl
(Chesham and Amersham)
(Con)
Griffith,
Nia
(Llanelli)
(Lab)
Hain,
Mr. Peter
(Neath)
(Lab)
Hanson,
Mr. David
(Delyn)Havard,
Mr. Dai
(Merthyr Tydfil and Rhymney)
(Lab)
Howells,
Dr. Kim
(Pontypridd)
Irranca-Davies,
Huw
(Parliamentary Under-Secretary of State for
Wales)James,
Mrs. Siân C.
(Swansea, East)
(Lab)
Jones,
Mr. David
(Clwyd, West)
(Con)
Llwyd,
Mr. Elfyn
(Meirionnydd Nant Conwy)
(PC)
Lucas,
Ian
(Wrexham)
(Lab)
Michael,
Alun
(Cardiff, South and Penarth)
(Lab/Co-op)
Moon,
Mrs. Madeleine
(Bridgend)
(Lab)
Morden,
Jessica
(Newport, East)
(Lab)
Morgan,
Julie
(Cardiff, North)
(Lab)
Murphy,
Mr. Paul
(Secretary of State for
Wales)
Öpik,
Lembit
(Montgomeryshire)
(LD)
Owen,
Albert
(Ynys Môn)
(Lab)
Price,
Adam
(Carmarthen, East and Dinefwr)
(PC)
Pritchard,
Mark
(The Wrekin)
(Con)
Ruane,
Chris
(Vale of Clwyd)
(Lab)
Smith,
John
(Vale of Glamorgan)
(Lab)
Tami,
Mark
(Alyn and Deeside)
(Lab)
Touhig,
Mr. Don
(Islwyn)
(Lab/Co-op)
Williams,
Mr. Alan
(Swansea, West)
(Lab)
Williams,
Mrs. Betty
(Conwy)
(Lab)
Williams,
Hywel
(Caernarfon)
(PC)
Williams,
Mark
(Ceredigion)
(LD)
Williams,
Mr. Roger
(Brecon and Radnorshire)
(LD)
Willott,
Jenny
(Cardiff, Central)
(LD)
Chris Shaw, Mark Oxborough
Committee Clerks
attended
the Committee
Welsh
Grand
Committee
Wednesday 18
June
2008
(Afternoon)
[Mr.
Peter Atkinson in the
Chair]
Future of Energy in Wales
[Relevant
documents: The Third Report from the Welsh Affairs
Committee, Session 2005-2006, on Energy in Wales, HC 876, and the
Government's Response thereto, HC 1656, Session 2005-06; and the First
Report from the Welsh Affairs Committee, Session 2007-2008, on Energy
in Wales: follow-up inquiry, HC 177, and the Government's Response
thereto, HC 435, Session
2007-08.]
Motion
made, and Question proposed [this
day],
That
the Committee has considered the matter of the future of energy in
Wales.[Mr. Paul
Murphy.]
2
pm
Question
again
proposed.
Mr.
Roger Williams (Brecon and Radnorshire) (LD): It is a
pleasure to follow the hon. Member for Carmarthen, West and South
Pembrokeshire. I think that everyone who listened to his speech would
agree that it was a very interesting presentation, on a subject that
deserves more research. I am sure that he is going to work on it. There
has been speculation that speculation is at the heart of the rapid
increases in fuel prices, but I think his contribution gave the point
more substance, and was a very forceful argument in that
direction.
Normally
when we have debates on energy we rightly focus on power generation and
how to replace fossil fuels with new, cleaner sources of energy. This
is, of course, a key area, and I would like to cover it a little later,
not least because it is the ultimate solution to the problems we face.
I would, however, like to start by looking at the problems of high
energy and high fuel costs, which I know everybody is familiar with
from their constituency postbag.
One issue we
would all like to emphasise is the high relative price of electricity
in Wales compared with the rest of the UK. There seems to be no obvious
reason for that, and, given that the price paid by south Wales
consumers is 10 per cent. higher than the average for the rest of the
UK, and 5 per cent. for north Walians, there are obvious areas for
research and action by the regulators to tease out the reasons for
those obvious
disadvantages.
The
Energywatch briefing we have received seems to say that although the
costs to suppliers of metering and the obligations to fund the cost of
renewable energy and home generation efficiency are broadly consistent
across Great Britain, others which relate to the network, such as grid
charges and electrical system losses, are not. Consumers in south Wales
are paying the highest price for grid charges, while north Wales
consumers are paying the highest price for network
losses.
Considering
that most of the electricity used in Wales is generated in Wales, it is
very difficult to find any logical explanation for that. People across
Wales and,
indeed, the UK, are being hit by rises in energy costs, whether in
heating their homes or at the petrol or diesel pump. All people in
Wales are feeling those effects, but rural areaswhere access to
mains gas is very limited, and homes are heated and cooking is done
with heating oil and with liquefied petroleum gashave seen the
steepest rise.
At the start
of the year, the price of heating oil was 45p a litre, and today it
stands at about 60p a litre. I am looking at long-term trends. Library
figures obtained by my hon. Friend the Member for Ceredigion show that
over the past six years, heating oil prices have increased by 77 per
cent. in real terms, compared with 46 per cent. for gas, 27 per cent.
for electricity and 15 per cent. for
coal.
All
energy prices are rising, but we know from looking at what has happened
to energy prices over the last few years that consumers in rural and
remote areas have been worst hit. Moreover, many of those consumers
live in houses where improving efficiency and reducing heat losses is
either difficult or very expensive, making it a double
whammy.
We
could also be doing more to get people on mains gas. A number of
communities not on mains gas would certainly benefit from it. If the
resources were made available to them, it would reduce fuel poverty in
those areas. However, extending the mains and getting connections to
houses is a costly process. I know that the Welsh Assembly is
considering using its money in that way to reduce fuel poverty, and it
would be a very direct way of doing so. I am thinking of some of the
mining communities and the small villages in south Wales that are not
on mains gas and could be brought on to
it.
There
have been significant problems of competition in the energy market, and
there are currently investigations into them. I would like an
investigation into the whole energy market, which as far I can tell has
made life more difficult for people. We are all familiar with the
routine of prices rising as a result of increased oil prices but
failing to fall when the price of oil goes down, as it has in the
past.
I
am pleased that leading energy companies have pledged £225
million to combat fuel poverty, albeit over three years, with
£150 million of it coming in 2011. However, we must ask why they
have done that. Big companies do not do things unless they feel that
they are getting a business advantage from them. It might be that the
millions that they have pledged are a drop in the ocean compared with
what they would lose if we were to have a truly competitive pricing
structure. My right hon. Friend the Member for Sheffield, Hallam
(Mr. Clegg), the leader of the Liberal Democrats, made a
point at Prime Ministers questions today about the carbon
trading system, which has had a windfall advantage of about
£9 billion for large energy companies. That is a big
figure compared with the £225 million that they have offered to
deal with fuel
poverty.
A
Competition Commission investigation into liquid petroleum gas has
found that prices vary wildly, with some customers paying 50 per cent.
more than others. The report found that those prices were a result of
restrictions in the market and a lack of transparent pricing.
Additionally, prices were kept artificially high by the difficulties
that individuals found in switching suppliers. Even where switching was
possible, many consumers did not know how to do it. I think that that
remains the case, and older, more vulnerable and poorer consumers are
less likely to take advantage of switching than younger consumers.
Advice and support on the switching process would be a good way of
ensuring that people get the best
price.
Of
course, the Prime Minister is not to blame for the global rise in the
price of oil, as he never seems to tire of reminding us, but he should
take responsibility for failing to do all that he can to help out the
hard-pressed rural communities that face the triple whammy of higher
fuel prices, a lack of public transport and being a greater distance
from services. Ministers will know that France, Greece and Portugal all
have an EU derogation that allows them to vary fuel tax in rural
areas.
Lembit
Öpik (Montgomeryshire) (LD): My hon. Friend knows
that incomes have gone down by 4 per cent. in the past 12 months in our
constituencies. Does he agree that although the overall increase in
fuel prices is driven primarily by the market forces that we discussed
this morning, the Government could show willing by seeking the same
derogation for hard-pressed rural communities such as ours? Frankly,
the feeling in our communities is that the Government do not really
care that the people who most need fuel to get around, because of the
sparsity and rurality of where they live, are paying the highest, not
lowest, prices for
it.
Mr.
Williams: As always, my hon. Friend makes a cogent
argument. It is an anomaly that the price of fuel is highest in rural
areas. Oil companies tell us that that is because it costs more to get
the fuel to the areas where the need is greatest. Disposable income
will fall in the next few years, and fuel prices will restrict
peoples ability to gain employment, access services and seek
recreation and even
exercise.
Last
week we heard reports that the barrage could be the most expensive
option for the Severn estuary. My worry is that while the review seems
to be looking at all the options, there is a perception that the
Government have already decided in favour of the barrage. The Severn
estuary has the potential to provide a large amount of renewable
energy, but we must not ignore potentially better options because the
Government have historically looked towards the barrage. We talked this
morning about the lagoon systems, which would have less impact on the
sensitive environmental areas around the
estuary.
Our
hope is that the Government have a completely open mind. Everybody is
committed to finding a way to harness the huge tidal resources of the
Severn estuary, but we must balance the environment against the
potential for renewable energy. All the available tidal technologies
need to be given due consideration. If the ongoing study decides that
the barrage is not the right option, the Government must give their
backing to those
recommendations.
The
Government are well aware that there is high demand for
microgeneration, as they know from the low-carbon buildings programme,
which rapidly ran out of grants in the early stages as there were not
enough to fulfil demand. I am interested to know whether the
administration of the scheme is running more smoothly and whether the
Government plan to increase the number of grants available. As of
yesterday, a grand total of 497 grant applications had been successful
in Wales. I appreciate the high costs involved, but none the less we
should be doing all we can to encourage increased microgeneration. I
hope to hear further news on that over the coming
months.
I
was interested that the Minister for Energy did not rule out feed-in
tariffs this morning. As he said, that is only a mechanism, but it has
proved very successful in Germany and other continental countries. I am
not making a theological point, but a practical one. We can learn good
lessons from places where such processes are
used.
Mr.
Stephen Crabb (Preseli Pembrokeshire) (Con): If the
Minister for Energy was so positive about feed-in tariffs, is it not
rather puzzling that he did not take the opportunity of the recent
Energy Bill to implement them in UK
law?
Mr.
Williams: I thank the hon. Gentleman for making that
point. As I understand it, the Energy Bill is still to come back to the
House on Report. I know hon. Members who will want to table amendments
on feed-in tariffs. I understand that there is some support from
Government Back Benchers on that, so that Bill is an opportunity to
make progress. The Minister for Energy talked about theology. He might
have had a conversion in the Committee. Welsh MPs can take the credit
for having changed his mind on such a vital
issue.
The
Government are looking at improving buildings as a way to save energy
and reduce carbon emissions. I hope that we can get some consensus on
the need for more energy efficient designs. Combined heat and power
must be used more widely. I look forward to hearing if there has been
any progress on that and what measures the Government are taking to
promote the energy efficiency of
buildings.
More
work needs to be done on improving carbon capture technology as a
transitional method while we build on existing renewables. We will have
to continue to use coal and gas in the short term. By reducing the
emissions from that form of power generation, we will be doing a lot to
tackle the problems of climate change. We can be world leaders in that
technology if we take the right steps now. My party has been saying for
some time that while climate change is undoubtedly a great threat, the
challenge to produce more renewable energy should be seen as an
opportunity as well as a
necessity.
I
understand that plans are being advanced to develop more offshore wind
farms across the country, including off the Welsh coast. While the
environmental impact of applications must be carefully considered
before going ahead with such schemes, I think that they are a step in
the right direction. My view is that offshore wind has been underused
and I am pleased that it seems to be playing a greater role in the
Governments
strategy.
Wales
has an opportunity to be a world leader in green technology and in the
generation of renewables. The rising cost of fossil fuels has given us
a nightmarish vision of the future, as these resources become ever
scarcer.