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30 Jun 2008 : Column 617

The best way to create a commercial market for microgeneration would be a system of feed-in tariffs. There should be no doubt about that. More than 16 countries in Europe have such tariffs, and there is about 16 times more microgeneration in those countries than here in the UK. The Government’s refusal to implement them in their latest Energy Bill is baffling. Alongside microgeneration, we need a comprehensive strategy to be implemented for the capture and use of heat. In Holland, combined heat and power became the biggest generating force in the country during the 1980s, yet UK power stations are losing £5 billion-worth of heat every year. We need to harness it as a source of energy, not dissipate it as a source of global warming.

Small-scale renewable projects do not go far enough. We still need a massive expansion of major renewable and low-carbon projects to suit the scale of the challenge that we face. Britain has an incredibly rich range of natural resources to build on. This emerald isle sits in a sea the power of which, if harnessed, could provide huge amounts of electricity to both the UK and Europe. It is clear, too, from a report by EEF, that marine technologies represent a gold mine for British companies looking to establish themselves in the low-carbon industry.

Mr. Weir: Is the hon. Gentleman aware, however, that there is a provision in the Energy Bill on the banding of renewables obligation certificates, which would give those undertaking demonstration offshore wind and marine renewables projects the choice of either a double-banded ROC or repaying the large grant? There is great concern among those in demonstration renewables projects that they will not proceed. What is his party’s position on that?

Alan Duncan: I understand the hon. Gentleman’s concern and I know that exchanges between him and the Secretary of State about that have taken place in the past. I think that the Secretary of State undertook to write to him.

However, the Government have not capitalised on our extraordinary advantages. For example, I would like an explanation of why their much vaunted marine renewables deployment fund has neither attracted significant interest nor distributed any funding in more than three years. It is all the more perplexing because Britain has more businesses engaged in developing marine energy devices than any other country. Why have the Government created eligibility criteria that are so complicated that companies simply cannot find the wherewithal to apply?

Furthermore, as was said earlier, we all recognise that coal could play a fundamental role in our future energy security. However, where we could have expected leadership, there has been muddled thinking. The Government’s delays have resulted in our one developed carbon capture programme closing down. What has happened to it? BP is working to develop it in Abu Dhabi, so a great British scientific breakthrough has been lost to this country.

The Government’s lack of vision has resulted in only one carbon capture and storage pilot project, whereas we know that there will be demand for more new coal-fired plants over the next few years. Are they to go ahead without CCS? The right and sensible way forward would be for the Government to accept our proposals for three CCS projects and move towards maximum limits on emissions so that the industry has absolute clarity about how it needs to change.

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There is also the question of storage. Our onshore gas storage is currently among the lowest in Europe. Some European countries are required to retain 80 days’ worth of gas, but we have the lowest storage, yet we are at the end of the pipe. Our position contrasts starkly with that in the winter of 2005-06, when we came within days of running out of gas.

For legitimate reasons historically, which are associated largely with North sea production, we have not developed the sort of onshore storage infrastructure that is normal elsewhere. That must change. I accept the contribution that new pipelines and liquefied natural gas can make, but as our domestic gas supplies dwindle, we need to be sure that we have sufficient supplies for several weeks, not just days.

We tabled a new clause to the Energy Bill that would require the Secretary of State to make an annual statement on his assessment of our long-term storage needs and the steps that the Government were taking to deliver them. The Government’s refusal to accept the new clause again makes us fear that they will not take the necessary steps to ensure our long-term energy security.

The debate must be seen against the EU targets for renewables, which the Government negotiated. The Secretary of State knows that few people believe that they are achievable except at massive cost to businesses and households in this country. It is not a time for the Government to say that we should aim high—of course we must, but the aims must be achievable and realistic. Time after time, the Government have set targets and slid away from them as it becomes apparent that they are undeliverable. That happened with renewables and with fuel poverty targets, but the EU targets are on a different scale. The Government must explain in much greater detail the way in which we can achieve a target of generating 15 per cent. of our energy and perhaps 40 per cent. of our electricity from renewables.

What do the Government perceive as the role of marine and tidal energy? How would we achieve those targets if the Severn barrage either were deemed too damaging to the environment or was held up for years by wrangling? They need to explain how they have decided how much it will all cost. The Government’s estimate is £5 billion to £6 billion a year, but the Renewables Advisory Board estimates that the cost could be as high as £100 billion in capital investment from UK industry and property owners. Indeed, it was reported this month that Paul Goldby of E.ON believes that the Government’s green energy targets could add £400 to the average household’s fuel bills as utilities companies pass on the additional investment costs to consumers.

Of course, we want tough targets for renewables and low-carbon energy, but we also want them to be realistic and achievable so that investments are made on sound business principles to establish as much energy independence as we can, not to satisfy the EU’s arbitrary whims.

Energy security is one of the most important issues on the political agenda and its significance is growing. The various elements that make up this country’s approach to energy should not be taken in isolation. It is no exaggeration to say that, together, properly structured and implemented, they will determine our very survival. To avoid a period of profound peril 10 years hence, the decisions to avoid that peril must be taken now. Too few
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such decisions have been taken. For the sake of our future, we urge the Secretary of State to get on with it without delay.

5.5 pm

The Secretary of State for Business, Enterprise and Regulatory Reform (Mr. John Hutton): I beg to move, To leave out from “House” to the end of the Question, and to add instead thereof:

I welcome much in what the hon. Member for Rutland and Melton (Alan Duncan) said, particularly his analysis of what is happening in energy markets and his appreciation of the scale of the challenge that we face in responding to it. I agree with a lot of what he said about the importance of tackling the threat of climate change, too. He is right that in some respects there is a measure of cross-party consensus in the House about the right way of dealing with those challenges. However, he will not be surprised to hear that I disagree strongly with his analysis of the actions that Her Majesty’s Government have taken so far to address those considerable challenges.

May I offer the hon. Gentleman a little bit of friendly advice? I am not sure whether he chose the topic for today’s debate or whether he was frog-marched, as it were, into tabling such a motion—we can speculate about that—but I thought that the point of Opposition Supply days was for the Opposition to showcase their policies. However, I obviously had that wrong, because I listened intently to what he said and he clearly has no policies to showcase. We heard nothing from him or in any of his hon. Friends’ interventions that shed any light on what his approach would be. In a week when his party—and, I am afraid to say, the Liberal Democrats—voted against the Planning Bill, which is probably the most important reform of recent times and which can help us to secure our country’s energy future, the hon. Gentleman has some cheek in moving his motion today.

Alan Duncan: The Secretary of State says that we have not put forward any policies. Which of our policies did he miss? Was it feed-in tariffs, smart meters, agreeing
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with the changes to the renewables obligation certificate or carbon capture and storage? I could continue with the list, but it would appear that he was not listening.

Mr. Hutton: No, I was listening to the hon. Gentleman’s comments, and I want to talk about what I understand his party’s policies to be in a minute. Indeed, I wish that they were as straightforward as he is now presenting them to be. I want to highlight some of the confusions that characterise his party’s policy on energy.

The Government have taken the necessary decisions to help secure our country’s energy future, not ducked them, on climate change, nuclear power and shaking up our planning system, as I said, so that we can get on and make the important changes that need to be made. The Government have made the right decisions. On renewables, we have set out what I believe to be the best way of securing our long-term energy needs, lessening our dependency on fossil fuels in the process. On every one of those issues, the Opposition have been found wanting—pandering, dithering, gesturing.

Mr. Redwood: If a company wanted to embark on getting planning permission to build a nuclear power station today, would the Secretary of State advise it to wait until the quango is set up and the national policy statements are in place and to use the new system, or would it be quicker to go under the old system?

Mr. Hutton: We are likely to see planning applications being made in the next couple of years, and they will be dealt with under the new system. The new system will be more streamlined and effective. I do not know whether the right hon. Gentleman has talked to potential nuclear investors, but strong support is being expressed, and not just by the CBI and some other industry organisations, for the reforms that Her Majesty’s Government have proposed. Let me say to him and others that the status quo is not a credible option. The current planning regime has woefully let down the country’s needs in relation to major energy infrastructure projects. If we need confirmation of that point, we need only cast our minds back to the six-year long Sizewell B inquiry, which I believe significantly delayed investment in nuclear power.

Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): Does my right hon. Friend agree that the Liberal Democrats, who oppose nuclear power, and the Conservatives, who are not prepared to vote for the planning means to get nuclear power, not only put at risk our future energy security but create an obstacle for the British engineering companies that make a huge contribution to world technology and jobs in this country? It is envisaged that up to 200 nuclear power stations will be built over the next 30 years worldwide.

Mr. Hutton: I strongly agree with my hon. Friend, and I pay tribute to his lifetime support for the nuclear industry. There was an unfortunate unholy alliance between the Liberal Democrats, who opposed the planning reforms and who oppose nuclear, and the Conservatives, who say that they support nuclear but opposed the planning reforms. One is a means of achieving the other, and I believe that the hon. Member for Rutland and Melton needs to go back to the drawing board and reconsider his position on this issue and many others.

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Martin Horwood (Cheltenham) (LD): If undemocratic planning procedures are so essential to promoting renewables, why have 22 out of 25 European Union countries managed to promote renewables with a lot more community involvement and democratic consultation in planning than the Government are proposing?

Mr. Hutton: If we look at the planning arrangements in many other European countries, we see a much more streamlined system. It is not part of the Government’s reforms, which the hon. Gentleman is deliberately mis-describing for his own reasons, to take away the opportunity for people to lodge a proper objection to a development. It would be quite wrong to do that, and I challenge him to say that that is the right way to describe the reforms that we have proposed.

There can be little doubt that securing the UK’s energy supplies as we make the transition to a low-carbon economy is one of the greatest challenges that our country faces. As the hon. Member for Rutland and Melton has rightly said, we are doing this against a backdrop of rapidly rising energy prices. In the face of this new global landscape, our efforts are focused on three principal issues. First, we must ensure the greatest degree of energy security and independence for the United Kingdom. Secondly, we must address the threat of climate change. Thirdly, we must do all that we can to mitigate the impact on consumers of the rising cost of energy.

I shall deal first with the issue of energy security. As we all know, global competition for energy resources is intensifying. Resource nationalism, closed-off markets, subsidies and state-owned monopolies are all combining to remove investment incentives to exploit the world’s energy resources. Another pressing reality that we need to face is the ageing nature of many of our existing power plants. Over the next two decades, we will need to replace one third of our energy generating capacity. Nine of our current power stations will be substantially affected by the implementation of the large combustion plant directive, and might have to close by 2015. All but one of our nuclear power plants will have closed by 2023. This domestic reality demands that we all take decisive action.

First, we need to maximise domestic energy production. The UK still meets about two thirds of its energy needs from the UK continental shelf. There could be at least 25 billion barrels of oil and gas equivalent left in the North sea, and we need to do all that we can to utilise those remaining resources. In 2007, the highest number of offshore exploration and appraisal wells was drilled since 1996. About 300 million to 400 million new barrels equivalent was discovered, and this year has seen the highest levels of interest in new licences for more than 30 years.

However, we cannot afford to be complacent. We are committed to maximising UK oil and gas production, and that is why I recently announced measures to incentivise increased production in our existing oilfields and to enable new fields to come on stream as soon as possible.

Mr. Redwood: Why did the Government spend the previous years increasing taxes and tweaking the tax system against the producers of North sea oil and gas in a way which they warned would result in their not
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optimising production? Are not the Government only now belatedly realising what a mistake that was? Why do they posture with the Saudis when we could do more to raise production at home if we had the right tax system?

Mr. Hutton: My right hon. Friend the Chancellor is responsible for petroleum revenue tax. He regularly meets the oil and gas industry to discuss these issues, and it has strongly welcomed our recent proposals and announcements. As to the right hon. Gentleman’s comments about the Saudis, it is quite wrong to characterise the discussions with them as pandering; that does not do him any justice at all.

As I said, we need to create the right investment climate for UK energy infrastructure, which is rightly our No. 1 priority. Billions of pounds have been invested in new gas storage, which the hon. Member for Rutland and Melton mentioned, and new import infrastructure. He rightly referred to the new LNG terminal at Milford Haven, which will bring Qatari liquefied natural gas into the UK. Also under construction is 8 GW of new generating plant.

We are also forging ahead to develop the low-carbon technologies that we need to support our security of supply and climate change objectives. Last year, we set out measures in the energy White Paper to triple renewable energy capacity through the renewables obligation. In September, we began a feasibility study on a barrage across the Severn estuary—one that could provide as much as 5 per cent. of the UK’s total electricity requirements. In December, I announced plans that could allow companies to build 25 GW of new offshore wind capacity by 2020. Last week, we announced with Ofgem immediate action to strengthen grid access for renewables—a matter to which my hon. Friend the Member for Bolton, South-East (Dr. Iddon) referred. Our proposals on connect and manage should help unblock some of the current delays in getting new renewable projects connected to the grid much more quickly. Perhaps as much as an extra gigawatt could now come on stream much more rapidly.

Last year, there was a 20 per cent. increase in offshore wind generation capacity, and we will soon overtake Denmark to become the world’s leading offshore wind generator. The hon. Member for Rutland and Melton was highly critical of the Government’s record on the promotion of wind power. It is worth reflecting on one fact: as a country, it took us 20 years to generate the first gigawatt of wind-generated electricity; the second gigawatt, under the present Government, took 20 months to bring on stream. We must do more, and do it urgently, to meet our share of the EU 2020 renewables target.

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