Future of Energy in Wales

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Nia Griffith: There is an issue about how we can prime certain projects before it becomes economically viable for companies to take them over. Putting money into research and development is valuable in that respect.
The hon. Member for Clwyd, West talked about shipping lanes. We are discussing the draft Marine Bill in Committee, which proposes a new comprehensive planning system to help manage Britain’s seas and make it simpler to deal with the many competing demands such as fishing, dredging, conservation, marine turbines, offshore wind and recreation. The draft Bill reflects the current devolution settlement, and Welsh Assembly Ministers have been involved in discussions with the Department for Environment, Food and Rural Affairs about the development of the legislation. I hope that it will provide a clear, constructive and comprehensive way to plan and implement policies for the sea because there are hugely competing interests.
On the issue of coal and fossil fuels, the International Energy Agency document, “Energy Technology Perspectives 2008—Scenarios and Strategies to 2050”, pointed out that on today’s best estimates, a business-as-usual scenario projects a 130 per cent. rise in world CO2 emissions by 2050. That reflects the increasing demand for energy in industrialised nations and developing countries.
Between 1980 and 2005 the greatest increase in energy use was in gas, with coal in second place. Between 2005 and 2030 the biggest increase will be in the use of coal. There will be a significant increase in demand from countries such as India and China and from the middle east. We all recognise that such an increase in CO2 emissions will have catastrophic consequences. Scientists tell us that it could cause rises in world temperatures of 4 to 6 C, with the consequent melting of ice caps. However, we cannot simply blame countries such as China and India, which are building coal-fired power stations at an enormous rate. We must consider our own responsibility because of what we have already pumped into the atmosphere over the last few hundred years.
The target in the Climate Change Bill is a 60 per cent. reduction by 2050. That is an enormous challenge and we will have to use every measure that we can think of to achieve it. While we must do everything possible to improve energy efficiency and develop renewables, we must recognise that 40 per cent. of our electricity is generated from gas and 33 per cent. from coal. Effectively, we are still 70 per cent. reliant on fossil fuels. With our current usage of fossil fuels, the worldwide demand and the fact that coal will become increasingly important, it will come as no surprise to any of us that the International Energy Agency has stated that:
“CO2 capture and storage for power generation and industry is the most important single new technology for CO2 savings”.
In other words, we are not going to get rid of our use of fossil fuels just yet, not even for electricity generation. Therefore, it is imperative that we press ahead with carbon capture and storage technology. There are difficulties, of course, and it is still in its infancy. However, the technology is known and understood as well as being viable and workable. It needs more investment, research and development. We have to work out how to use it with existing power stations—geography raises the issue of whether a facility can be placed close enough to be a practical solution—or we have to consider new build. As we look to build new coal-fired power stations, we need to look carefully at how to incorporate carbon capture and storage.
I suggest to my right hon. Friend the Secretary of State that he talk to the Minister for Energy about what we can do in Wales to develop carbon capture and storage. It is being talked about in the context of coal. People seem to forget that all fossil fuels produce carbon dioxide. Whether we are burning gas, using oil, or even using biomass, we produce carbon dioxide. We need to be thinking of imaginative ways of capturing that carbon dioxide and preventing those emissions from escaping. There is a very real need for us to develop this technology and to do everything we can to ensure that it is used, both in retrofit and in new build.
If coal is to be used worldwide, it becomes more and more viable, as prices soar, to look at some of the options we have in Wales such as deep mining. I ask my right hon. Friend the Secretary of State to keep an open mind about the potential for coal, and to look at possible ways of encouraging exploration and investment. In that way we can find out what would be the most viable areas to open up again.
I agree with other hon. Members who have said that we need to be extremely sensitive about open-cast. Wrecking the communities and environments that we have taken considerable time to restore over the past 30 years is not the way forward. However, we need to look carefully at what we can extract and how we can use it. Although we might like to move to 100 per cent. renewables, we will be reliant on fossil fuel for some time to come and Wales has a strong contribution to make to that.
3.13 pm
Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): It is a pleasure to follow the hon. Member for Llanelli. There has been a very good debate today and I welcome the format of this Committee, with the Minister for Energy speaking and taking questions at the start of proceedings. It has demonstrated the value of the Grand Committee.
One reason we are focusing on energy in Wales is that we are building on a lot of the work that was done by the Welsh Affairs Select Committee. I pay tribute to the hon. Member for Aberavon, who led that work very effectively and, as a result, produced two excellent reports that helped to shape some of our thinking around energy issues in Wales.
This is a timely opportunity to be thinking about such things. This afternoon, even as we speak, there are groups of protesters outside the gates of the Merco oil refinery in Milford Haven and the Chevron oil refinery in Pembroke, trying to blockade Wales’s two oil refineries. They demonstrate the frustration and pain being felt right across the country by hauliers, people in agriculture and the fishing industry and across different business sectors as a result of the crisis linked to the soaring price of oil on the world markets.
As other Members have mentioned, and as I mentioned in my question to the Minister for Energy—I make no apologies for reiterating it—the Government really need to look at the punitive fuel duty regime in this country, which puts us out of step with our European competitors and puts our excellent Welsh haulage industry at a competitive disadvantage to its European, Irish, French, Hungarian and German competitors. It is losing market share. Many good Welsh businesses are suffering unnecessarily because of the punitive fuel duty regime. Again, I call on the Secretary of State for Wales, when he is sitting at the Cabinet table discussing this, to make the case not just for not applying the expected fuel duty increase later in the year, but of looking at ways of using some of the extra taxation revenue from North sea tax and soaring VAT receipts to try to fund a decrease right across the board in fuel duty.
I want to try to be positive this afternoon. The hon. Member for Carmarthen, East and Dinefwr has stolen my thunder by giving a positive, upbeat view of the energy industry in Wales. There is an awful lot for us to smile about and welcome. The Library tells me that, at a conservative estimate, 8,000 people in Wales are now directly employed in the energy industry. That does not take account of the many more thousands working in civil and mechanical engineering and the support services that help serve our energy industry.
The numbers employed are expected to increase as the industry develops, as new projects emerge. Much of what has been exciting in the energy industry in the UK in recent years has been happening in Wales, and I am very pleased to say that a lot of that has been happening in my little corner of Wales, in Pembrokeshire, where there are not just the large liquefied natural gas projects, but some exciting developments involving renewables, particularly wave and tidal power.
Take, for example, the LNG projects. More than £1 billion of investment is going into just two projects in Pembrokeshire and there are many other projects around the county. Developers have advanced millions and millions of pounds to promote projects. This is not about Government sitting down and planning the projects: they are being brought forward, and brought forward successfully—as in the case of the LNG projects—because the private sector is responding to market signals.
Much of our discussion on energy policy this afternoon has really been about the imperfect nature of the energy market. Perfect markets exist only in economics textbooks, and there are many imperfections and kinks in the market that need to be looked at. But when we are talking about energy security, security of supply, responding to the challenges of climate change, fuel poverty, and social justice linked to energy policy, we keep faith with the fundamental bedrock principle of energy policy: the market, a clean, well-functioning market. It is markets that will deliver new projects and give us the diversity of supply that the Secretary of State emphasised in his contribution and which is so important to energy security.
The hon. Member for Carmarthen, East and Dinefwr repeatedly emphasised the contribution that electricity generation in Wales is making to the UK—greater than Wales’s own electricity needs, if I am correct. I thought he was going to follow through and make the point that I have heard some of his Plaid Cymru colleagues make that Wales almost should not be producing this amount of electricity.
Mr. Llwyd: No, we did not say that. It is silly.
Adam Price: It is a fair point to say that decisions in Wales about energy projects should be made in Wales. The fact that we are already exporting electricity is, I think, a material fact that is relevant to that debate. Decisions should be about Welsh needs first and foremost, and if we can export, then that is another matter. But most importantly, let us have the right to decide ourselves.
Mr. Crabb: There is a fundamental point of difference between myself and the hon. Gentleman in that respect. The truth is that the energy industry is becoming more internationalised. There has been some reference to dependence on foreign imports—specifically imported gas—but right across the planet, if we look at what is happening in the energy industry, the world is becoming more and more energy interdependent. We are relying on other countries for gas needs. What is happening in the UK is really no different from what is happening in many other industrialised countries. We are going to have to rely on more imported energy, which is not necessarily a bad thing.
Albert Owen (Ynys Môn) (Lab): The hon. Gentleman is absolutely right. There is interdependency. He will be aware of the interconnector between north Wales and the Republic of Ireland. Ireland, one of the fastest growing economies, still needs the energy, and we have surplus electricity. Does he agree that we should go further and perhaps have two or three interconnectors? We could get rid of the surplus electricity to industries in the Republic of Ireland rather than just storing it.
Mr. Crabb: I welcome the hon. Gentleman’s intervention, but I do not have a view on the number of interconnectors. We should let the market and industry decide that. The role of Government and politicians is to provide a well-functioning framework for the markets to make the most sensible assessment of what infrastructure is required.
There is another point on imports: 100 years ago, 10 million tons of coal were exported out of Cardiff docks, while now as a country we are 75 per cent. reliant on imports for our coal needs. That is a big reversal. However, no one can seriously argue that, as a result of becoming 75 per cent. reliant on imported coal, our security of supply in coal has been jeopardised and made less sure or secure. One could plausibly argue that security of coal supply has been enhanced, because we now rely on five or six major global producers for that energy source.
Adam Price: The hon. Gentleman is in danger of suggesting that he would rather be reliant on foreign producers rather than Welsh coal miners. Surely that is not what he was suggesting.
Mr. Crabb: No, it is not what I was suggesting. That is a heavy over-interpretation and misrepresentation of what I was saying. There has been a long-term decline in the UK coal industry. Recent industry and market changes might revive a portion of that, which I would welcome. I am a strong advocate of a strong energy industry in Wales and throughout the UK, right across the board, from renewables to coal, nuclear, oil and gas—let us take the whole lot.
Mr. Roger Williams: I still do not follow the hon. Gentleman’s point. I understand that, if we need to import 75 per cent. of coal, it is best imported from a number of sources, but I cannot see how we have better security of coal by importing it in the first place. Surely it must be more secure if produced within the nation.
Mr. Crabb: We would think and hope so. However, with heavy reliance on a domestic coal industry, if that industry is for example threatened with strikes and supply interruptions—
Adam Price: Here we go.
Mr. Crabb: The hon. Gentleman may say that, but it is an important point to make. Not to stretch the point, but leave it as it is—we should not have an overly irrational fear about imported energy. That is the way of the world. We shall increasingly move in that direction. We should adopt an internationalist perspective when it comes to thinking about energy.
Ian Lucas: Surely, the hon. Gentleman must accept that the position of the Russian Government, for example, on gas exports is potentially dangerous as far as energy supply to the rest of Europe is concerned. Should those security of supply issues not be of concern to the UK Government?
Mr. Crabb: Absolutely, and recognising what the hon. Gentleman said does not negate my point. We should be looking at a diversity of supply sources for our imported gas. If are going to rely on imported gas, then let us make sure that it comes from several locations—from Qatar, Trinidad, Algeria, west Africa. That is how we guarantee security of gas supply.
I want to move on to skills and employment. The Secretary of State said that not nearly enough people were employed in the energy industry in Wales. The LNG jobs that were brought to west Wales in recent years have been hugely welcome. Those projects have helped to wipe out the official rate of male unemployment in Pembrokeshire. I welcome that, but those projects have highlighted huge skills shortages, not just in Wales, but in the UK. We have been shown up. We were talking about being reliant on imported energy, but we are reliant on imported labour to make those large-scale energy projects happen. While the people I talk to in the industry recognise that there has been an increasing focus from the Welsh Assembly Government on energy jobs and skills related to the energy industry, they feel that there is nothing like as much energy going into or as much focus on that important area as there should be. Some of those involved in managing the projects comment that they are still not seeing enough appropriately skilled people—from civil engineers to welders, from mechanical engineers to security guards—from the indigenous local work force. As we think about future energy policy and development in Wales, we need to ensure that our education and training regimes produce better skilled people who can service those projects.
The hon. Member for Carmarthen, East and Dinefwr rightly flagged up the tidal and wave power projects that have been developed off the west Wales coast. I will not repeat his points, other than to say that those projects are extremely exciting and innovative, and are receiving support. The Wave Dragon project receives objective 1 money, and money from DBERR supports the joint venture between Lunar and E.ON. E.ON is a big company more commonly associated with gas and coal, but it is heavily backing that project. The tidal waters of the UK have the potential to supply around 6 or 7 per cent. of total UK energy demand. That does not sound a lot, but if it can be maximised it brings us an awfully long way towards reaching some of our wider renewables targets. In Wales, we have some sections of coastline that are particularly well suited to wave and tidal projects. They have high movements in tide levels and are relatively free from shipping lanes. There is exciting potential there.
To conclude, this has been a good debate. It is easy to try to score partisan points, but it is more constructive to engage with some of the difficult issues. The difficulty with energy policy is that we are thinking about a world that we would like to get to— particularly in the context of climate change and responding to that—but we also have to deal with the world that we live in here and now. Some decisions are uncomfortable, and will be unpopular with those who believe that we should be constructing that future world as quickly as possible. However, we need to be realistic.
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Prepared 19 June 2008