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Welsh Grand Committee Debates

Future of Energy in Wales

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


[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.
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 Minister’s 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 people’s 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 Government’s 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.
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Prepared 19 June 2008