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Mr. Hutton:
We set out in the White Paper a lot of the detailed arithmetic and economics in connection with decommissioning and waste disposal, and I am happy to refer my hon. Friend to that. If there is to be a renaissance for nuclear power in this country—and I very much hope that there will be—it is important that we establish new ground rules that comply with the existing energy market principles on which this country operates. That is why the provisions in this part of the Bill have been brought forward. This is a new and different era. The Central Electricity Generating Board is no more. We need a regime that is fit for an energy
market that operates effectively in the United Kingdom, and that is why, if we are to go ahead with new nuclear, the clauses are essential.
Mr. Chaytor: Will the Secretary of State give way?
Given the concerns of my hon. Friend the Member for Pendle about new nuclear, I would hope that he would engage constructively with at least this part of the Bill, which is designed to protect the public from any covert—or, indeed, overt—subsidy for new nuclear. I am sure that he and I share that aim.
Part 4 covers several issues relating to the oil and gas industry. A strong market-based approach to domestic energy production will help to ensure that we have diverse energy supplies. The UK still meets about two thirds of its energy needs from the UK continental shelf, but clearly our ability to continue to maximise domestic production economically will depend on the way in which we manage the regulatory framework to incentivise production. By working together with, for example, PILOT—the high-level oil and gas forum for Government and industry—we have successfully sustained interest in investment in the UK continental shelf through several initiatives, such as the fallow exercise and the promote licence. Last year, total expenditure on the UK continental shelf was more than £10 billion. We continue to work together on a range of projects, including that to examine the potential west of the Shetland isles.
The Bill will make minor amendments to the oil and gas regulatory framework to reflect the evolving commercial environment, including the growing number of smaller players on the UK continental shelf. The measures in the Bill—I am glad to say that they are supported by the industry—will help to ensure that we can continue to manage the UK continental shelf efficiently and effectively, and will remove some of the potential risks that are inherent in the existing system. To that end, we are making minor changes to the oil and gas licensing regime, including by taking the power to revoke a licence partially in the event of, for example, the insolvency of one but not all of the parties to that licence. That will be an important new flexibility in the regulation, and it will benefit consortiums of smaller companies when one party defaults but the others are perfectly able to continue. In addition, to enable fair access by all parties, we are extending the coverage of the upstream oil and gas infrastructure third party access regime.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The Secretary of State mentioned the west of Shetland. Does he believe that anything in the Bill will help to take forward the taskforce for the west of Shetland? How optimistic is he that we will unlock the gas and oil to the west of Shetland, given that the best thing for our security is to maximise the use of what we have in our own waters?
Mr. Hutton:
No legislation is inhibiting the development of west of Shetland resources in any way, so we do not need provisions in the Bill to tackle that problem. The hon. Gentleman will be aware of the detailed discussions
that are taking place. I have met the operators and the oil and gas companies in Aberdeen to discuss their concerns. I have also been offshore to see many of the people who will be critical in making the project come alive. I hope that a way forward can be found, but it is the economics, rather than legislation, that must be addressed. I do not believe that anything in legislation prevents the development of those resources.
Part 5 deals with several more minor aspects of legislation, including rationalising energy policy reporting requirements and aligning them with the new requirements that are being introduced through the Climate Change Bill.
The Bill updates the regulatory framework for nuclear security to ensure that we have stronger sanctions to prosecute people who attempt to steal the most sensitive information from specific designated sites. The recent restructuring of the industry means that sensitive information relating to uranium enrichment may be stored away from licensed sites, such as research facilities. The provisions in the Bill will mean that no matter where such sensitive information is held, it will be protected through the availability of appropriate sanctions.
We must all face another reality: as global energy demand increases and the competition for supplies intensifies, worldwide energy prices are likely to continue to be high. Of course, we cannot isolate ourselves from such global market trends, but we can adopt the right measures to ensure that the UK is as energy-independent as possible. The Bill will help us to ensure that that objective can be better realised. Of course recent price rises are a concern for all of us, but our competitive market works. For more than a decade, our market has consistently delivered prices to UK domestic consumers that are lower than those in the vast majority of other countries. A growing number of consumers are also actively using the market to their advantage, switching suppliers and saving money.
We have introduced a number of important measures to help people meet the costs of keeping their homes warm in winter, including the winter fuel allowance, and there has been growing support for home insulation. The energy companies are working closely with my Department to address the energy needs of consumers on low and fixed incomes. We will meet the companies again soon to discuss their continued commitment to assisting their customers through a range of activities.
Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): Many people are interested in the issue of energy prices, which my right hon. Friend just mentioned. May I draw his attention to research by Cornwall Energy Associates suggesting that some companies, such as British Gas, are much more committed than others to making social tariffs work? Will he address that issue, and does he accept that when he deals with that matter, and with the scandal of energy prices, he will get a lot of support?
Mr. Hutton:
I am grateful to my right hon. Friend for making that point. I hope that it is some comfort to him that we will continue to monitor closely the situation that he describes. We do not rule out the need for legislation on social tariffs at some point in future, but legislation should be a last resort and must not act
to restrict the innovative practices that some energy companies have been developing, including on help with arrears, which could help consumers even more directly.
Taken together, the measures in the Bill will play an essential part in ensuring that our country has access to safe, secure and sustainable energy in the years ahead. I hope that the wide range of measures will ensure that our legislation plays an effective role as we work through the tensions and complexities of the challenges that we face. The Bill deserves the support of Members of all parties, and that is why I commend it to the House.
4.36 pm
Alan Duncan (Rutland and Melton) (Con): I am grateful to the Secretary of State for his introduction to the Bill, but what he outlined is not so much a complete energy policy as a set of technical amendments to existing rules and laws. Many of them are important measures, but the House will view it as a missed opportunity to tackle the full range of energy challenges that the country faces. Legislatively, there are elements on emissions relating to the Department for Environment, Food and Rural Affairs, a Planning Bill that sets out a framework for infrastructure decisions, the Energy Bill that we are considering, which addresses a hotch-potch of issues such as gas storage, carbon capture, the renewables obligation and decommissioning, and a so-far elusive Bill on handling nuclear waste.
In addition, tomorrow the European Union will publish a package of measures designed to reduce carbon emissions and increase energy efficiency across the region. It includes a commitment to establishing an ambitious renewables target of about 15 per cent., not just for electricity but for all energy. The Government’s attempts to disguise their incoherence on renewables with targets set far ahead in a fantasy future are now unravelling.
Even today, in an answer to a written question asked by my hon. Friend the Member for Wealden (Charles Hendry), the Minister for Energy has watered down the Government’s target of obtaining 10 per cent. of our electricity from renewables by 2010. He now says that the figure might be as low as 8 per cent. Now that the arithmetic is clear, we see that we have an almost insurmountable rock to climb. Given the way in which the Government have delayed for the past five years, the UK is not likely to meet the target by cleaning up; we will meet it only by buying our right to be dirty. That is like someone bribing a doctor for a sick note when they are too lazy to go to work.
The challenges that confront the United Kingdom are twofold. First, for our own environmental integrity, and to secure even a hint of global leadership on the issue of tackling climate change, we must cut our carbon emissions. Secondly, we must ensure that while we move to a low-carbon economy, we do not compromise our security of supply.
We must produce approximately 40 GW of power a year. We are likely to need more energy in future as our economy and population grow, yet over a third of our generating capacity will go out of service over the next 20 years. We therefore face two unpalatable options: a dash for foreign gas, tying us into the always unpredictable and often combustible state of international politics or,
worse, an energy shortfall that will simply blow Britain’s fuse. Our response must be immediate, radical and realistic. Non-carbon-emitting technologies may well be the most effective and efficient way of powering domestic households, but in the management of peaks and troughs in the intensive use of a chemicals factory, for instance, renewables may not provide sufficient consistency and horsepower. This is a serious “get real” moment for the Government.
Underpinning all the policies in the Bill is the need for an effective carbon regime, which is the basic instrument with which to stimulate investment in the green market. The EU emissions trading scheme is not an effective system. We have seen wild fluctuations in the carbon price, from €30 to virtually nothing, and up again to €25. Under phase 1 of the EU ETS, which ends this year, only 5 per cent. of the initial allowance was auctioned. We face an almost obscene paradox: because oil prices are high, the most carbon-emitting companies have enjoyed a £9 billion windfall. We are rewarding the dirtiest, not the cleanest, producers. For phase 2, ending in 2012, the number of auctionable permits has increased to only 10 per cent. Very little is known about phase 3.
The system is in disarray yet, paradoxically, the Government want a proper carbon regime to underpin their carbon capture, renewables and nuclear policies. There are no measures in the Bill, however, to strengthen such a regime. We want the EU ETS to operate as effectively as possible, but we believe, too, that investors in green technologies do not have time to wait for reforms to the ETS, so we urge the Government to look into our proposal to underpin the system with a carbon tax.
Colin Challen: The hon. Gentleman’s analysis is very interesting. The Environmental Audit Committee has looked at the EU ETS, and I agree that billions have been made in windfalls for electricity generators. Given the immediacy of the problem that we face, does he agree that a windfall tax on those generators is an ideal way of raising money, which could then be hypothecated for renewable generation?
Alan Duncan: That could destroy the investment climate for future energy investment. I do not want to make any precipitate comments about such taxation decisions, except to say that if we are to have a sensible energy policy, a constant climate for investment is required. One of the worst things that we can do is chop and change, and pounce on people who do well. We need a regime that does not have perverse outcomes, and I shall come on to that issue in a few minutes.
The challenges that we face are immense, and we have to set aside party political biffing. We must work together whenever we can to work towards an era of safe, clean, reliable energy.
Mr. Michael Clapham (Barnsley, West and Penistone) (Lab) rose—
Alan Duncan: Here is the coal man.
Mr. Clapham:
The hon. Gentleman will know of two decisions made by the Conservative Government in 1992 and 1994 that created the crisis that we now face.
In 1992, his Government decided to close the world-leading clean coal technology centre at Grimethorpe colliery, and in 1994, after butchering the coal industry, they privatised what was left, when it had gone beyond its critical mass, so its demise was built in. Had those two decisions not been made, security of supply in this country would be sound.
Alan Duncan: There may, for the hon. Gentleman, be a delicious historic point. In 1987 I was the Conservative candidate for Barnsley, West and Penistone, and I gloriously increased a 10,000 Labour majority to a 14,000 Labour majority and still made it look like a success. The real lesson, I would say to the hon. Gentleman and some of his parliamentary colleagues who sit on the same Bench, is that we must look forward and stop looking back. We cannot just look back and say what was. We have to look forward and work out what we can do for the good of the country in the future.
We recognise that companies are being asked to make investments that will last for a generation or more, and they need to know that their politicians are taking the issues seriously and, I would say again to the hon. Gentleman, are working together. We should acknowledge the great interest that the subject has generated outside the House, and we should thank those who have sent all of us the submissions that we need to study today in order to reach our conclusions on the Bill and on the issue as a whole.
Greenpeace, for instance, says that nuclear is a distraction from focusing our real energies on renewables. I do not entirely agree, but it is a legitimate view. WWF says that we should not build any more fossil fuel installations without carbon capture technology. Friends of the Earth champions our support of feed-in tariffs. Energywatch says that we need to ensure that energy companies offer social tariffs for those trapped in fuel poverty. The Energy Saving Trust and the Energy Retail Association both support our call for mandating smart meters to improve energy efficiency. The Renewable Energy Association makes a range of submissions to strengthen the Bill’s incentives for renewables, including developing a sustainability remit for Ofgem. No doubt all those will be debated in Committee in a sensible and open-minded way.
The Bill first addresses the storage of gas. The recent shift in the UK’s status from producer to net importer of gas means that our need for storage facilities has become a very high priority. Because gas is piped and not shipped, it is either on or off. Ships can be redirected, but pipelines cannot. Being exposed to this on/off decision leaves us vulnerable. If we can store gas, that represents a significant antidote to energy vulnerability. If the proposals enable energy companies to buy in the summer and sell in the winter, and pass on to consumers the financial advantages of doing so, it is a no-brainer.
Given that some people have a perfectly rational fear about the security of long-term import dependency, the Government should be committing themselves to developing more capacity for strategic reserves, ready to be called upon in a national or international emergency.
The Bill also establishes the regulatory framework to explore the potential of carbon capture and storage. We strongly welcome the fact that the Government are finally beginning to take real action on CCS in the UK. We are already seeing the exciting results of such experiments in Norway and the United States. With our large offshore oil and gas presence, the UK is uniquely equipped to take the lead with this technology and cut our own emissions while providing an industrial base for CCS manufacturing and design.
Regrettably, as the hon. Member for Dundee, East (Stewart Hosie) said, the dithering over the past three years has set back our ability to deploy CCS in the UK by up to even a decade, I would argue. We were warning the Government for months that the lack of an adequate regulatory and financial framework risked derailing BP and Scottish and Southern’s joint venture at Peterhead. Only an hour after the 2007 White Paper was published, as we predicted, the project collapsed. Had CCS qualified for the renewables obligation, the plant would undoubtedly have been able to go ahead, but as the former Secretary of State for Trade and Industry, now the Chancellor, informed me after the publication of that White Paper, CCS is not included in the renewables obligation because it is not renewable. Perhaps not, but it does capture carbon, which fulfils the same objective.
We still have concerns. If, for instance, 90 per cent. of carbon is captured, will the emissions count as zero or is there a proper formula for making a calculation? Perhaps the Secretary of State or the Minister can point me towards a proper explanation, amid the Government’s various tranches of energy policy statements, of what would happen to the economics of the operating company if CCS were successful.
Mr. Hutton: The hon. Gentleman has just made a point about whether carbon capture and storage should benefit from the renewables obligation. Of course CCS is low-carbon technology, but so is nuclear power. Does the hon. Gentleman propose that the renewables obligation should extend to nuclear technology as well?
Alan Duncan: There was a crucial moment when the development of CCS technology was very important to this country, and the Government goofed—big time. We were ahead and now we are behind; we were way ahead of the pack on CCS and now we are not. That brings me to my next point, which is about the climate change levy. As the Secretary of State has just said, nuclear power is not carbon-emitting—so why is it subject to the climate change levy, which is effectively a tax on carbon? That illogical taxation structure has to change if the Government are to give a proper structure to their energy policy.
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