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Westminster Hall

Tuesday 27 November 2007

[Mr. David Amess in the Chair]

Energy Policy

Motion made, and Question proposed, That the sitting be now adjourned.—[Malcolm Wicks.]

9.30 am

Mr. William Cash (Stone) (Con): I sought this debate with deep concern and in the knowledge that the United Kingdom will face an energy crisis unless action is taken soon. Energy is the lifeblood of the nation; it affects our business community, enterprise, domestic heating and, indeed, life itself. The old and the infirm, hospitals, rail travel, schools and everything that moves—the entire economy—can do nothing without energy. It is also a weapon of foreign policy, or can be used as such. The bottom line is that we need a continuous supply of this vital commodity and to maintain relative energy independence from other nations.

The UK desperately needs an energy policy. Despite the length of this summer’s energy White Paper—it runs to 342 pages—it dealt much more with what we need to do than with how to do it. It was largely mute on how investment from UK companies is to be stimulated and encouraged in order to build new power stations and energy infrastructure. It has been 10 years since I secured an Adjournment debate on the future of British coal reserves in the coal industry—this is not a new subject for me—and 15 years since I voted, with only three others, against my own Conservative Government’s pit closure programme and the then much-heralded dash for gas. I firmly believe that many of the economic issues that this nation faces will be guided and determined by our ability and capacity to provide households and businesses with the lowest priced energy possible. I do not resile from my decision to vote against my own Government.

Our over-dependence on expensive gas for the generation of electricity is placing more households in fuel poverty, which is when more than 10 per cent. of household income is spent on energy bills. That over-dependence on gas is also jeopardising the UK’s safety and security of energy supply, because more and more gas is being imported from Russia, the middle east and north Africa. We have seen already the effects of the new politics of energy. When Russia shut off the gas supply to Ukraine early last year, it caused a massive spike in gas prices by interrupting one of the main supplies into Europe. That over-dependence on gas should make us aware of the precarious situation that we need to avert quickly by taking the correct energy decisions now.

I am concerned also about the fact that the EU reform treaty, which the House will debate soon, contains a new energy chapter and essentially the same provisions as those in the original constitutional treaty. It also adds a new element to the policy—the interconnection of energy networks. As was the case
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under the original constitutional treaty, energy measures cannot affect a member state’s right to determine conditions for the exploitation of energy resources, its choice of energy resources or the structure of its energy supply. However, environmental measures—I am told that we will discuss the planning statement this afternoon—can affect such matters. Although such matters are governed by unanimity, the doctrine of the “occupied field” could severely inhibit the manner in which we can legislate. If the new energy chapter goes in, albeit unanimously, we would remain in a very difficult position should we seek to legislate on our own terms—something that I insist upon, because Parliament has to have sovereignty over its energy policy and legislation.

Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): I thank the hon. Gentleman for his commitment to the coal industry. He mentioned our over-dependence on gas. As he will be aware, we are likely to experience an energy crisis between 2012 and 2015 because of the simultaneous closure of coal and nuclear stations. Some 40 per cent. of our electricity is provided by gas, and during that crisis, and before we bring on new nuclear stations, the Government are likely to accept section 36 applications for many more stations. By the end of 2015, therefore, we might well be even more dependent on gas. Does the hon. Gentleman therefore agree that the Government ought to take the line that a sufficient number of gas stations are now providing electricity and that no more gas stations should be brought on?

Mr. Cash: I agree with the hon. Gentleman, and that point will become clearer in the light of what I have to say. I pay tribute to his work as the chairman of the all-party group on coalfield communities, of which I have the honour of being vice-chairman. I believe strongly that his work and focus on such questions is of inestimable importance to the national interest.

It is clear now that the irresponsible claim, made in October 1992 as part of the justification for the coal closure announcement, that the country’s gas reserves were sufficient for around 55 years was wrong and misleading. That announcement was led by the then Minister with responsibility for such matters, the now Lord Heseltine. I vigorously opposed him and the then Government, who have a great deal to answer for on this matter. Among other things, they binned the former Energy Select Committee, which should be recalled in order to focus specifically on the questions being discussed today. I accept that energy has been enveloped by another Select Committee; however, we need a special focus on it.

British gas reserves are in decline and we now face increasing gas prices, coupled with increasing oil prices, which is having an upward impact on the price of electricity. We are at risk of putting all our energy eggs in the gas basket.

Mr. Stephen Crabb (Preseli Pembrokeshire) (Con): I am learning a lot from my hon. Friend. In the last year or so, gas prices have fallen because new import infrastructures have come on stream. I have spoken to people in the energy industry, and their outlook for the next three to five years is that there will be relatively low gas prices.

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Mr. Cash: That is because of imports, but we must have regard to the impact of over-dependence on supplies from elsewhere. Part of the problem is the great insecurity and uncertainty over Russia, along with German control of the pipeline system, which was evidenced by the fact that Mr. Schröder’s first act after leaving the chancellorship of Germany was to take up the chairmanship of one of the most important divisions of Gazprom. If that does not tell us something, I do not know what does. We must also consider the insecurity and instability in the middle east. I recognise that my hon. Friend has a constituency interest in this matter and that we should welcome imports. However, that does not mitigate the fact that we are facing increasing gas prices over the medium and long term as well as a lack of supply security.

We must incentivise new clean coal and nuclear build. Only last month it was announced that one quarter of the country’s nuclear power stations are to be shut down because of safety issues. News of the shutdowns led to fears of possible power shortages and made electricity prices on the spot market spike by 17 per cent. As recently as 14 November, the national grid issued a flash warning that there might not be sufficient spare generating capacity to meet any unexpected surge in electricity demand the following day.

The days when Britain could rely on plentiful gas from the North sea are gone. Indeed, in recent years, Britain has fallen back on relying on coal generation of electricity to see it through. I represent a constituency in north Staffordshire, which was one of the jewels in the coal mining crown. Florence, Silverdale and Trentham collieries were big hitters, often beating their annual production targets. As I have already said, I vigorously opposed the closures of Silverdale and Trentham collieries, both of which had substantial reserves. I might add that I also challenged Arthur Scargill when he was doing an enormous amount of damage to our local industry in Staffordshire. I went on a platform, took the microphone away from him and told him to lay off my miners. In other words, I do not just choose my targets—I try to get the balance right across the board.

I was aware then, as I am now, that those pits represented a part of Britain’s future energy security. At the moment, we also have a very interesting situation developing in Kent. All I can say is that I sincerely hope that the planning paper being presented today will give us a real opportunity to make certain that the development of clean coal technology is given a fair opportunity and is not in any way diminished by the planning proposals that we shall hear about later today.

I would like to set out how I believe that coal can and should enjoy a renaissance in the energy sector. I am speaking not out of nostalgia, but in the light of the new technologies that allow us to reduce the fuel’s carbon emissions radically. The fact is that coal generates the cheapest electricity on the grid and allows us to use an indigenous energy asset that Britain enjoys in abundance. Furthermore, if the coal supply is properly calibrated, it would guarantee that in any international crisis, we would not be over-dependent on other countries if that crisis worsened. That idea is absolutely fundamental to my argument; we must not be over-reliant on other countries.

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Mr. Crabb: Can my hon. Friend give a sense of what he means by over-dependence? Is he arguing that we should make it the goal of British energy policy to be self-sufficient and energy-independent? I would argue that that is unrealistic. Alternatively, is he saying that we should achieve a better energy balance? If his argument is about achieving a better balance, what proportion of energy imports would constitute over-dependence?

Mr. Cash: It is almost impossible to arrive at a calculated formula that would give an answer to the latter question. However, I do favour the idea of a proper balance of policies; I am not suggesting that we should just have one policy. As I said earlier, energy is the lifeblood of the nation and we must have a safeguard, so that if we were put in a perilous situation, we would know that we were not in a hazardous position and that we would be able to maintain energy supplies across all the domestic fields that I listed earlier. Therefore, I am arguing for balance—I am not saying that our energy policy should be based exclusively on coal. However, if there were perilous circumstances, we need to know that we could rely on a proper and proportionate amount of coal to guarantee that we were not put in an unduly hazardous situation.

Coal still plays a very important part in electricity generation in Britain. In an average year, it produces more than 35 per cent. of the UK’s base load electricity. As I have already indicated, in recent winters, which have been quite mild, that figure has risen to as much as 50 per cent. Coal has many advantages. It is plentiful, indigenous and can be stockpiled; it is comparatively cheap, flexible and responsive to peaks and troughs in demand; and, unlike gas imports, it is not vulnerable to geopolitical risk. Only nuclear power can match those advantages. However, current coal-fired power stations were considered environmentally unacceptable because of their substantial carbon emissions—until new clean coal technologies emerged. The Government cannot avoid providing development and support for those new technologies if they genuinely wish to create a balanced energy portfolio.

The UK has the opportunity to be at the forefront in developing such technology. I welcome the Anglo-Chinese clean coal agreement, which was announced last week. I also welcome bringing in other kinds of imported opportunities for supply, which can lead to a better energy policy. At the same time, however, if the United Kingdom is to avoid an energy crisis, we must place clean coal at the heart of our future energy policy and stimulate investment in the development of our substantial reserves.

Willie Rennie (Dunfermline and West Fife) (LD): I have a particular interest in the carbon capture and sequestration project that the Government announced recently, because Longannet power station, the second largest coal-fired power station in Europe, is in my constituency. There are, however, a couple of concerns about the project: first, only one successful project has been proposed as part of the competition; and secondly, the Government have not been clear enough about what is required from the competition. Does the hon. Gentleman have any comments to make about that?

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Mr. Cash: Yes, I do, and I have no doubt that the Minister will reply to and deal with that issue. The point is that we have reached a watershed, and the need to accelerate and incentivise clean coal technology is a matter of extreme national importance. It is no good saying, “We have got a balance because we are taking some interest in this”; it is a question of proportionality. There has to be clean coal, and there must be a proper system that takes account of the problem that the hon. Gentleman just mentioned. Having said that, however, I think we need more, not less, emphasis on this issue.

Mr. Crabb: Could it not already be too late in the day to bring forward clean coal technology? The point has already been made powerfully that the crunch will come in the next 10 years, with the retiring of old coal-fired and nuclear power stations. In the absence of commercially viable clean coal technology that can help to bring on a new generation of coal-fired power stations, the industry will in the meantime introduce low-cost, low-risk solutions, meaning yet more gas-fired power stations.

Mr. Cash: I recognise where my hon. Friend is coming from, but I repeat what I have said already: we must have a proper balance. The emphasis on clean coal technology is disproportionately diminished, and I want this debate to generate some interest in that issue.

Estimates of coal are not made annually in the same way that they are for UK gas and oil reserves, but it is important that the House be made aware of some recent industry estimates. In 2006, the Coal Authority estimated that there were more than 600 million tonnes of coal in established and accessible UK reserves. Importantly, in British Coal’s 1992 annual report, it estimated that 190 billion tonnes of coal lay underneath the UK, of which 45 billion tonnes could be extracted using the then known techniques. Of course, a lot of progress has been made since. British Coal estimated that the pits then open—before the 1992 closures—had 1.1 billion tonnes in classified reserves that could be economically extracted.

To put those estimates in context, total UK coal output between 1853 and 2006 was only 22.7 billion tonnes. That gives us some sense of what is left now—even after the whole industrial revolution and two world wars. Some 22.7 billion tonnes has been used since 1853, and the estimate is that 190 billion tonnes of coal lies underneath the UK now. To make coal-fired power stations more efficient and less polluting, clean coal technology uses equipment such as super-critical boilers that can be retrofitted to Britain’s ongoing coal-fired stations.

However, the most exciting prospect is the so-called carbon capture and storage process, which the hon. Member for Dunfermline and West Fife (Willie Rennie) mentioned. That involves capturing carbon dioxide before it is released into the atmosphere, turning it into a liquid and storing it in old oil or gas fields under the sea. One positive by-product of injecting pressurised gas into such depleted fields could be the further extraction of oil reserves—a process known as enhanced oil recovery. The Treasury would be the obvious winner in such a process.

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The main types of carbon capture technology are defined by whether the carbon is removed before or after the coal is burned—pre-combustion and post-combustion. There are pros and cons to both techniques. Post-combustion uses more energy than pre-combustion and the equipment is more considerable, requiring more land to be available at each power station, but pre-combustion is suitable only for new coal-fired power stations.

I was disappointed to note that, as I understand it, the Government have decided to back only post-combustion clean coal technology; no doubt the Minister can confirm that. It is important that incentives and overt Government support also be given to pre-combustion, which will allow us effectively to turn coal into gas and remove 90 per cent. of CO2 emissions for sequestration. Such clean coal stations, known as integrated gasification combined cycles, represent a near zero-emission coal solution for the UK, which is quite a prize. I firmly believe that there should be more encouragement from the Government for such projects, and I await the Minister’s comments on pre-combustion technologies.

While modernising existing stations is to be welcomed, we should also support brand new designs and therefore new build, which would allow us to use our coal well into the future. New power stations that gasify coal represent the only process that changes one form of energy—coal—into another, more flexible energy: hydrogen gas. As the Minister will know, hydrogen is becoming increasingly important in new technologies such as those possible in air travel and the motor car. Those technologies are important and we need to develop them. The benefits are clear. In addition to providing a clean, reliable and local source of power, the gas does not have to be fired to generate electricity, but can be injected into the gas network and thereby improve our gas supply position—I pay tribute to my hon. Friend the Member for Preseli Pembrokeshire Mr, Crabb) for his interest in gas—and our negotiating position with gas importers. The Minister and his Department must do more to encourage that process and those working to bring it about in the UK. Coal-rich countries such as the United States and Australia are streets ahead in their support for the technology.

Electricity generated from coal offers a number of strategic advantages for Britain. It ensures that sustainable and competitively priced electricity is available to UK customers; it offsets security risks and the costs of importing increasingly expensive gas from the middle east and Russia; and it has proven over many years its ability to meet rises in electricity demand, compared with the less predictable output from renewables. The Government have produced a statement on that in the past week or so. With new clean coal technology installed at new and existing powers stations, it can also help to foster a high-growth, low-carbon economy.

The UK has an installed electricity generating capacity of 77 GW. However, much of it will come off stream in the next decade as older nuclear and coal stations are decommissioned. Unless capacity problems are addressed rapidly, the UK could face an estimated 33 GW electricity generation capacity shortage by 2016. That, in short, represents the energy crisis that I mentioned earlier. EDF Energy argues that that
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generation gap will be a direct result of paying off older coal and nuclear stations without swiftly replacing them with clean coal and new nuclear stations. As a consequence of such a development, we could become perilously over-dependent on gas.

If, as I strongly believe, clean coal and nuclear power are needed in the balance to fill the fast-approaching energy gap, and consequently reduce emissions while maintaining competitively priced electricity, streamlined planning procedures for such major infrastructure projects are essential. I await the planning reform statement this afternoon and the Planning Bill with much interest and anticipation.

Due to the running down of the domestic coal industry, there are only a handful of deep mines left, producing about 10 million tonnes of coal a year. Coupled with open-cast output, that takes the total output of British-mined coal to a mere 20 million tonnes a year. The market for coal in the United Kingdom, largely for the power stations, is about 60 million tonnes. The huge difference of about 40 million tonnes is taken up by unnecessary and expensive coal imports from countries such as Russia, Poland, Colombia and Australia. For the reasons that I am giving, a disproportionate amount of coal is imported.

As shipping costs soar, there is a consequent impact on the price of coal imports and the electricity that they generate. Imported coal is more expensive than British-mined coal. British coal is also free of the volatility associated with international coal prices and exchange rates. Imported coal puts more pressure on docks and transport infrastructure and contributes substantially to the UK’s balance of payments deficit. Also, the carbon footprint of importing coal is significantly more than that of producing coal locally and transporting it the short distance to local power stations. Port-to-power-station coal flows are significantly longer than the pit-to-power-station merry-go-round rail operations that still operate, but on a much smaller scale than in the past. That places extra pressure on our rail infrastructure. Imported coal is discharged at Immingham, Avonmouth, Clydeport, Medway, Liverpool, Hull and many other ports miles from the power stations that it must reach.

There are some encouraging developments on the mining scene. A healthy coal price has made some new prospects viable. The Hatfield colliery near Doncaster has reopened and plans to become a 2 million tonnes a year pit. Importantly, its owner, Powerfuel, intends to build an IGCC power station alongside the mine. However and as I have said, the Government have decided against supporting pre-combustion clean coal technology. In Wales, the Unity drift mine in the vale of Neath and the Aberpergwm mine have recently started production. They are the first deep mines to be opened there in 30 years and will supply the Aberthaw power station, which is to be retrofitted with clean coal technology. In recent years, Aberthaw has depended heavily on coal imports through Swansea. New mines are also planned in Scotland.

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