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The debate takes place against a background of record prices and the inevitability of further increases. Gas prices are trading at 59p today and at 107p for the first quarter of 2009, which will have a massive impact on consumers. It is widely expected that gas prices will increase by as much as 40 per cent. by the winter and that electricity prices will do so by only marginally less. That could increase the numbers in fuel poverty by up to 1 million and cause huge pain to households throughout the country, so it is clear that price security and energy security go hand in hand.
We recognise that the United Kingdom has been lucky over the past century. We were at the centre of a western-dominated system of global trade and finance that brought not only huge social and economic benefits, but underpinned our role as a formidable force on the international stage. Through a quirk of geology, we enjoyed the good fortune of having an enormous amount of natural resources at our disposalfirst coal, and then oil. That has helped make us prosperous, but it may also have helped make us complacent.
Now, the world economy is undergoing a fundamental transformation. Gradually, the centre of gravity is shifting eastwards, and China and India have developed faster than many people could ever have imagined, opening up new trading corridors and creating flows of capital that completely bypass the west. Each extra 1 per cent. of economic growth results in a 1.5 per cent. increase in the demand for energy, creating unprecedented global pressure on energy demand, so we are no longer assured of being at the head of the queue for the vital commodities that sustain our economic growth. Whereas 15 years ago we may have looked to the North sea for our energy requirements, the decline of production from the continental shelf has exposed us more and more to the variables of global markets.
Mr. John Redwood (Wokingham) (Con): Does my hon. Friend agree that on the question of how to generate more power from non-carbon sources, it is highly likely that, come the next general election, we will still have no more decisions than we have today, after 11 wasted years?
Alan Duncan: My right hon. Friend is absolutely right about the importance of taking early and urgent decisions about new investment. That is exactly the point that I and my colleagues want to address and, as I often say to the Secretary of State, we endeavour to do so in a spirit of cross-party agreement, because if we form the next Government, as we hope to, it is essential that investors know that there will be continuity for their investments.
Mr. Oliver Heald (North-East Hertfordshire) (Con): But has it not been obvious for some time that great economies, such as Indias and Chinas, have been expanding fast and, inevitably, would want their share of those precious resources? Should not the Government have understood that point and done somethingtaken actionto provide for our future energy needs?
Alan Duncan: My hon. Friend is absolutely right about appreciating that our electricity generating capacity and equipment would to need to be replaced, and quickly, but to be fair to the Opposition, and occasionally I am
No onenot even the expertscould have predicted the ferocity of the increase in commodity prices over the past year. It was a genuine shock to our economy and to that of the entire world. We can, however, look into the future to some extent.
Mr. Crispin Blunt (Reigate) (Con): My hon. Friend is being generous to the Government in an unwarranted fashion. All the decisions that are being taken now in 2007-08 should have been taken in 2002-03, when the Government produced an energy White Paper that ducked all those decisions. The commodity price increases of last year apart, everything that is happening now and that we are having to deal with now was predictable.
We can look into the crystal ball and see the big picture looming. For instance, the International Energy Agency says that between now and 2030, primary energy consumption is expected to increase by two thirds. As demand growth already outstrips supply growth, the meteoric rise in energy prices that we are witnessing is likely to be a lasting feature and not just a temporary glitch. Given that crude oil is trading at around $140 today, the UK literally cannot afford to play this global game of risk.
But we do not have to play that game. This islandwith its high winds and high seas, its skilled work force trained in the energy industry, its manufacturing sector restructuring towards a high-tech and value-added model and its green financial centre in the City of London which is leading the world in carbon tradingis uniquely placed to go green and secure our energy independence. Under our Conservative vision, not only is it possible to combine energy and climate security, but that is the only practical strategic choice. However, that long-term vision can be made possible only with the political will to make big decisions. As my right hon. and hon. Friends will argue, the Governments lack of action in the past decade has not only compromised our long-term low-carbon future, but left us vulnerable in the short term as well.
Steve Webb (Northavon) (LD): I absolutely agree with the hon. Gentleman on the importance of the new emphasis on renewables and the United Kingdoms renewables capacity. Presumably, they were also important 10 years ago. Can the hon. Gentleman remind us about the share of renewables that the Labour Government inherited from his party?
Over the next 15 years all but one of our nuclear fleet of power stations will be withdrawn from service, a third of our coal plants will be decommissioned and we
will need about 25 GW of new electricity generating capacity to keep pace with our expected needs and the predicted economic growth. As my hon. Friends have pointed out already, the Government have been aware of that impending supply gap for years. Let me remind the House of what they said in the energy review a mere two years ago. They said that if, as the modelling of the then Department of Trade and Industry suggested, the closure dates of nuclear and coal-fired power stations coincided in about 2015and we all now know that they will
market participants may not be able to respond by developing and commissioning new power stations in a timely fashion.
That was in 2006. What has happened since? We have heard a great deal about nuclear power, although new reactors are still unlikely to be operating much before 2020. However, to give credit where credit is dueI am doing my bestI recognise that the Government have worked to identify the concerns of potential investors and to put in place a framework that answers some of those concerns; I pay tribute to the work of Dr. Tim Stone in achieving that.
However, we are now waiting for talk to convert into action. In the meantime, we have added only one percentage point to our current renewable capacity, and that will not get near to meeting even the Governments original target of 10 per cent. by 2010, let alone the targets subsequently established by the European Union. We also have a Government who seem to be intent on building a new generation of coal-fired power stations at almost any cost, leaving future generations with a massive carbon headache.
The problem for the Government is that they know that they have ducked the big decisions over the past 10 years. We have had White Papers, reviews, consultations and strategies, the latest of whichit was only a consultationwas published last Thursday, yet it still feels as though the momentum that the country needs for investment and change has hardly got beyond first base. Much of the blame attaches to the Prime Minister, who did little for the environment while Chancellor and who, now he is Prime Minister, simply does not understand energy markets. He asked Sir Nicholas Stern to write a report on climate change and then totally ignored most of its main proposals. He could have helped to establish the first UK pilot scheme for carbon capture and storage at Peterhead, but he ignored it and the project collapsed. He put £50 million into a fund to develop marine renewables, but made the conditions to access it so complex that so far not a single penny has been given away. His latest trick was to try to persuade OPEC to turn on the taps and invest its cash in our green technologies. That stunt, which turned into a humiliating begging mission abroad, showed scant understanding of what oil is or how the international commodities markets work. One cannot ask the Saudis to pump more oil when it is the wrong kind of oil and when global refining capacity is already strained, and one cannot expect the price of oil to go down when the pricing structure is far more dependent on militant attacks in Nigeria or the falling value of the dollar than on a few more barrels of Arab heavy.
Chris Bryant (Rhondda) (Lab):
I am grateful to the hon. Gentleman for giving way, especially as I was not here at the beginning of his speech. He will know that,
over the next few years, energy security across Europe is likely to become more dependent on the Russian Federation for supplies of oil and, in particular, gas. Is he as disturbed as I am by the most recent harassment of the BP joint venture by the Russian authorities, and does he believe that Europe should take a much more concentrated and united approach towards Russia on energy security?
Alan Duncan: I am reluctant to delve into areas that are better answered by someone who represents the Foreign Office or has the foreign policy brief. The relationship between BP and TKK is very complicated, and I would not like to say anything rash and silly across the Dispatch Box that might in any way jeopardise the profound discussions that are going on. In terms of security, we do not get much gas from Gazprom; a lot of it goes to mainland Europe, particularly Germany. However, the interdependence between European consumers and Russian suppliers needs to be understood, because without their markets abroad, Gazprom and the producers in Russia, the former Soviet Union, would be unable to subsidise gas supplies in their own domestic economy. It is a far more complicated picture than many newspaper commentators suggest, and we have to be very responsible in what we say.
Mr. John Horam (Orpington) (Con): In getting the right balance between security and greenness, does my hon. Friend agree that the signal failure of the Government is not to give sufficient weight to technology, which can play a huge role, particularly in carbon capture, where the relevant technology is available and could be brought into effect with very little delay?
Alan Duncan: I will expand shortly on carbon capture and storage, which is a crucial ingredient of this debate, as is the word technology that my hon. Friend used. Almost all sectors of energy production are on the cusp of a scientific revolution, whether it be the fuel cell, carbon capture, cleaner coal or, indeed, nuclear. In America, instead of having the carbon regime that we think should underpin policy here, people are putting total faith in technological change and development by investing millions, if not billions, in the science. We have chosen a slightly different path towards the same end, and each is a legitimate route. In the end, technology, above all, will address the problem that we face.
Mr. Heald: Germany, which was mentioned in the context of gas from Russia, has made strenuous efforts to diversify its energy supply. I believe that it is installing something like 130,000 photovoltaic panels a year, while we are installing only about 200. That shows that other countries have taken decisions and got on with the job of providing alternative sources of energy, while our lot have been snoozing.
Alan Duncan: One of the key differences between us and Germany, which has, in our view, encouraged the development that my hon. Friend rightly identifies, is that it has feed-in tariffs and we do not. I will return to that matter in a moment.
How can anyone believe that this Government can give the lead we need for a green energy revolution when, after 10 years in office, it is their policies that have left us 25th out of the 27 EU countries in terms of the proportion of energy we generate from renewables? The
price any country might face for not taking such serious decisions is clear: economic chaos. We saw that in South Africa, where 10 years ago, the power company Eskom told the Government that unless investment was made, power cuts would follow. That warning was heeded too late. Electricity blackouts have now become a common occurrence there, and they may continue for another five years. The economic costs cannot even begin to be calculated; businesses, agriculture and tourism have all been severely affected.
Such consequences in Britain would be utterly devastating, and to avoid them, we need to act now to ensure that the market delivers our energy in a way that is not skewed towards carbon-heavy fossil fuels. Our vision for energy security is built on three key planks: going green, cutting consumption and securing supplies. It is only by driving all those factors forward at the same time that we will be able to maintain clean, reliable and affordable energy. Overall, changing behaviour and championing energy efficiency will have far and away the most significant effect on the sustainability and, therefore, the security of our energy policy. The smart meter, for instance, could become one of the most important drivers of energy efficiency in the country. We are tempted to insert a new clause in the Energy Bill, requiring all homes to be fitted with a smart meter in 10 years. We are pleased that the Government have moved forward on that general principle, following the pressure applied from both sides during the Bills passage through the House.
We opposed the Governments proposal for electricity display devices on the basis that the information did not give consumers the full capacity to change their behaviour, or to sell electricity back into the grid via the use of domestic microgeneration. We are glad that the Government are no longer pushing ahead with that proposal, but valuable time has been lost while they arrived at the conclusion everyone else had already accepted.
Mr. Phil Willis (Harrogate and Knaresborough) (LD): Would the hon. Gentleman agree that the country faces two massive barriers that the Government must deal with very quickly? One is the planning system, which is relevant to the roll-out of renewables, because it clearly militates against making the required decisions in the time needed. What do the hon. Gentleman and his party have to say about that? The second barrier is the availability of the national grid to those wanting to put electricity into it, and its fitness for purpose in the 21st century to deliver what the hon. Gentleman, our party and, I am sure, the Government want. What does he think about that?
Alan Duncan: The hon. Gentlemans attack on the national grid is unwarranted. It faces a massive challenge. The infrastructure has served us well over the years, and Britain has been very lucky to have a national grid. Massive challenges face the National Grid Company in investing money to cope with, for instance, a new nuclear power station with a far greater capacity than existing ones. Rather than attack National Grid, the hon. Gentleman ought to understand the challenges, and support its efforts.
On the Planning Bill, we agree that there needs to be a swifter planning process, but we were unhappy with the Bill because of the undemocratic nature of the decisions to be taken. We did not approve of the independent planning commission, and I even think that some decisions should rest with the Secretary of State. We are concerned that there is no clear explanation of how the community infrastructure levy will work, and national policy statements that do not come to this House will lack any democratic warrant. That is why we expressed concerns about the Bill.
Dr. Iddon: I am grateful. There is 9.3 GW of renewable energy waiting to come on to the national grid. What is the hon. Gentlemans partys policy on the national grid, considering that that huge amount of energy is waiting, never mind the energy that is queuing up behind it?
Alan Duncan: The national grid needs to be able to take the energy that is ready to come on, rather than take it from power stations in the order in which planning was applied for. It is not easy, and I suspect that there will be a shift from onshore wind, which represents most of the energy that the hon. Gentleman identifies, to greater input from offshore wind. I shall come to that in a moment, because I wish to talk briefly about the renewables obligation.
What would we do? First, we need to kick-start a renewables revolution in the UK. At the moment, that is proceeding at a snails pace and a lot of targets have been missed. The UK has 40 per cent. of Europes wind resources, but just one tenth of Germanys 20 GW of wind capacity. That is related to the point that my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) made a moment ago. The current renewables obligation has skewed investment heavily in favour of onshore wind and methane, so we support the Governments decision to band the obligation and clear the path for the necessary massive expansion of offshore wind.
With offshore wind operating at a load factor of about 35 per cent., it is clear that the Secretary of States plan for 33 GW of sea-based turbines by 2020 is, to say the least, ambitious. We need a major roll-out of microgeneration for domestic households, schools, hospitals and public buildings. Even a report by the then Department of Trade and Industry estimated that we could get up to 40 per cent. of our electricity from microgeneration in the next 45 years. Even that figure lacks ambition, because ground source heat pumps, wind turbines and photovoltaic solar panels are increasing in efficiency and decreasing in cost all the time.
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