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Westminster Hall

Tuesday 28 April 2009

[Mrs. Joan Humble in the Chair]

Electricity (Scotland)

Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Tami.)

9.30 am

Gordon Banks (Ochil and South Perthshire) (Lab): It is a great pleasure to debate this important issue under your guidance, Mrs. Humble.

Scotland has a proud history of energy production and of extracting the raw materials to make that production possible. Today, however—I say this from, dare I say it, a traditional viewpoint—the deep mines are all closed and we are left with open-cast and North sea oil. However, the challenges that we face have not diminished; indeed, they have grown.

Over recent years, we have all become attuned to the need for clean renewable energy, but I am very concerned that the major political parties have embraced that need too late. For too long, clean renewable energy was on the periphery of the UK’s objectives and, sadly, on the periphery of mainstream politics. As we all know, things are very different today, but we are still running to catch up and to get where we might have been if the concept had been incorporated into mainstream politics 10 or 20 years earlier.

I want to spend a few minutes on each of our generating opportunities, before talking a little about consumption. Scotland must have a diverse energy mix, because that will deliver jobs, investment and energy security, as well as tackling climate change. Never in living memory have jobs and investment been more important, and to deliver on them successfully, we must have diversity.

The current recession has shown us the dangers of a lack of diversity, and that applies not only to the financial sector. Our dependency on oil and gas had a major effect on energy price rises last year and could cause similar problems in the future if we fail to get our act together. The diversity that we need will bring about investment over a range of generating options and bring growth in jobs, which one sector alone cannot deliver in the same volume. With gas and even oil coming from potentially increasingly unstable areas, we must have cross-sector investment. With investment and job growth, we will deliver energy security to the UK economy.

Another lesson that we should learn from the recession is that there is, and will be, a range of pressures on UK businesses. We cannot allow rising energy prices to have a detrimental impact on our businesses, when we could take action to avoid such pressures. If pressures are allowed to develop, they will make our businesses uncompetitive and, as sure as night follows day, result in reduced investment and the loss of jobs.

It is also important for the domestic consumer that we can provide options that result in steady and affordable energy prices. We know only too well the impact of last year’s rising electricity and gas prices, which were caused
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by escalating oil prices on the international markets. That was outwith the control of our Government and, indeed, of any Government. That in itself tells us that we cannot be dependent on a single source for our energy output and that we must have a balanced mix. To achieve that, we must take positive action. We need to keep the lights on, but we need to do it in a way that delivers economic security, jobs, investment, stable pricing and energy security.

North sea oil will remain an important but, sadly, declining contributor to our energy mix in the coming years. Oil and gas are responsible for 23 per cent. of Scotland’s energy mix, but that will decline as oil plants are closed by 2016 in line with the European large combustion plant directive. Recognising that oil and gas still have a future, however, the Chancellor committed only last week to increasing the incentives to explore and extract from the North sea. He introduced incentives to encourage smaller fields to be brought into production, and those fields could deliver about 2 billion barrels of oil and gas that would otherwise have remained in place. Indeed, this is not the first Budget to offer such incentives. North sea oil has contributed to jobs, investment and energy security in the past, and it can play a role in promoting them in the future. For several reasons, however, it cannot do that alone and, indeed, it probably cannot even be the biggest contributor.

Coal makes up 25 per cent. of our energy mix, and many would argue that too little of that volume is made up of output from Scotland. The country has a long history of coal mining, and many of my relatives, including my father and grandfather, have paid the ultimate price for that tradition. Mining illnesses have claimed many lives, including that of my father, and disasters such as the Valleyfield disaster of 1939, in which my grandfather was killed, are, sadly, a reminder of the dangers of such employment. However, mines in my constituency at Clackmannan, Dollar, Fishcross, Castlebridge and nearby Manor Powis and Solsgirth have fed many a family for many a year. As difficult, challenging and dangerous as deep mining may appear to us, many people in my constituency would willingly resume working in a deep mine tomorrow if they were given the opportunity.

As an honorary Bevin boy, it would be remiss of me, while on the issue of coal mines, not to acknowledge the role played by those conscript miners during world war two. However, to return to the current day and, indeed, to look to the future, recent newspaper reports suggest that there is some possibility of Longannet—the last deep mine in Scotland to close—reopening at some point in the future, despite reports of flooding. Flooding led to closure in 2001, but that is another matter altogether.

The one thing that could provide a real future for coal is carbon capture. The carbon capture and storage project is a real opportunity for traditional fuels to be used as part of the energy mix. CCS will provide an opportunity to extract and burn the millions of tonnes of coal believed to be in Scotland in a clean and modern way, while providing jobs, investment and energy security. We may need to watch this space, but perhaps my hon. Friend the Minister can say a little more about the issue in her reply.

I am a supporter of what we might call renewables—wind and water in their various guises. Renewables account for about 14 per cent. of our energy mix, and that needs
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to rise. A Europe-wide target of 20 per cent. renewables by 2020 is to be encouraged, and the UK’s legally binding 34 per cent. reduction in carbon emissions by the same date maintains our position as a world leader in the fight against climate change. However, the UK and Scottish Executive emissions targets of an 80 per cent. reduction by 2050 will come about only with the delivery of a mix of generation, technology and continuous political will.

The commitment by the Department of Energy and Climate Change to 33 GW of onshore and offshore renewables by 2020 will grow the renewables sector, but it is also required to replace the 25 to 30 GW of conventional generation capacity that will be phased out by a similar date. Last week’s Budget provided more than £1.4 billion of extra targeted support for the low-carbon sector, on top of the measures announced last autumn. That means that £10.4 billion of additional investment will be pumped into the low-carbon and energy sectors over the next three years.

Mr. Alistair Carmichael (Orkney and Shetland) (LD): Was the hon. Gentleman able to identify anything in last week’s Budget that would assist the development of tidal stream and wave power generation, as distinct from offshore wind generation?

Gordon Banks: If the hon. Gentleman is a little patient, I will come to that in a moment or two.

However, renewables cannot do it all alone. By 2025, Scotland will need to replace all its non-renewable generation capacity, which currently provides 68 per cent. of our output. If that gap is not plugged, Scotland will become a net importer of energy, in contrast to its current position.

There is also planning. Before everybody jumps to their feet, I should say that I am talking about planning not for nuclear—I will come to that later—but for wind farms. There is a history, in the short existence of wind farm applications, of planning procedures being extended, and many applications ending up with the Scottish Executive on appeal. I do not advocate the blanket approval of such applications, just because they happen to be for wind farms. Some applications will be sound, and others not. However, the trend has been an extension in the time taken for determination. My constituency is situated in one of the major wind corridors in the country, and I fully understand that there must be a balanced approach, but, from the perspective of the renewables sector, the planning system has not delivered renewable options at the pace that many would have wanted. That reduces the likelihood of our having a credible renewables sector as an alternative towards a nuclear generating base.

Mr. Mike Weir (Angus) (SNP): I accept what the hon. Gentleman has said about the planning system, which has long been a bane in many such matters, but does he accept that the Scottish Government’s new planning framework will go some way towards dealing with some of the problems?

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Gordon Banks: There is no doubt that action has been needed, and perhaps is being taken, to quicken things. However, there is still a significant backlog in the pipework that needs to be worked through, not least in my constituency.

Mr. Carmichael: I am not quite clear what the hon. Gentleman is telling the Chamber. Does he think that the planning system itself is flawed and in need of improvement, or merely that there is a backlog that needs clearing but that there is no need for structural change to the system?

Gordon Banks: I am saying that the planning system to date has created a backlog, which has reduced the potential capability of onshore wind production. That has been a significant disappointment to the energy generators. There are steps that have been taken, and can and will be taken, to work those applications through the system, and in time they will go through the system, but because the industry has recognised that the decision-making process is not swift or clear, multiple applications have been made to test certain areas, even when it is likely that there is a favourable location elsewhere. That has happened because the process is so unpredictable and takes so long. We need a quicker and clearer decision-making process, so that the good onshore renewable facilities can be given the go-ahead more quickly than has happened in the past. That is not, I think, difficult to understand—I do not mean to be flippant. We need the people who have the challenge of taking the decisions to take those decisions. It comes down to the individual decision-making process in each of our local authorities.

I am a recent convert to nuclear—perhaps “convert” is too strong a word, but realism has kicked in. I have long had concerns about the safety and storage of nuclear waste, and on that basis I would prefer my electricity to be generated in some other manner that might be classified as safer, but I always said that if I were to become convinced that the lights were in danger of going out, I would see the sense of nuclear. That day has arrived—we do not have much of an option.

A new generation of 11 nuclear power plants is being planned for England and Wales. It will deliver a growing level of energy security and carbon output reductions, and it will involve the investment of £3 billion in every new plant. There are areas of Scotland that have a nuclear history and whose economies have been and are now being supported by that investment. The question is whether Scotland should be deprived of that level of investment and in turn fail to play its full part in future UK energy production. In the past, investment has had multiple benefits, bringing jobs and economic security, reducing carbon output, managing costs and delivering a level of energy security. Perhaps the Minister will comment on whether she feels that Scotland should be deprived of such investment and goals in the future.

I do not doubt there are risks with nuclear generation—there are risks in everything that we do—but there are risks without it, too. It is a balance of those risks that needs to be accepted by everyone today. There is a real worry that the Scottish Executive, using their control over planning laws, will restrict and influence the energy policy of the UK in a way that could damage Scotland, and indeed the UK, on many fronts. Perhaps my hon. Friend the Minister will comment on that.

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John Robertson (Glasgow, North-West) (Lab): Does my hon. Friend agree that it is outrageous that any Government can use an obscure planning rule to stop something in an area that wants to receive billions of pounds of investment in a new power station and which is already a nuclear power station area, when there is a company that wants to spend the money—not Government money, but its money—and increase our contribution to the national grid?

Gordon Banks: It is something that I find difficult to grasp and have significant discomfort with, because a peripheral ability is having an impact on not only investment and jobs in the area but energy policy throughout the UK.

Mr. Weir: Does the hon. Gentleman see a slight contradiction in his argument? He argues that there should be changes for wind farms, but that nuclear is different. The Scottish Government are entitled to exercise their power under the electricity and planning legislation. Does he not see the contradiction?

Gordon Banks: No I do not, because what I have been saying about onshore wind generation is that the process has been too slow. I did not comment on whether the decisions have been right; I just said that the decision-making process has been too slow. My argument about nuclear and its impact on our energy policy is that, as I have said, we do not have an option. The point about the planning system and renewables is the time taken; the point about nuclear is not the time but the fact that a decision can be taken that will affect the energy policy, economic stability and energy security of the UK as a whole.

The 38 per cent. of electricity generation that nuclear is responsible for in Scotland cannot, no matter with what good intentions, be replaced in time by renewables. Indeed, the growing amount of renewables demands a significant amount of responsive back-up. If Scotland is to have a level of energy security in the future, play its full role as an energy provider in the UK and embrace investment and job opportunities, I do not see how current nuclear technology can be ignored.

The more diverse the sources of our energy production, the greater the challenges that will be placed on the grid infrastructure. The transmission access review carried out by Ofgem and the Department for Business, Enterprise and Regulatory Reform will support the more cost-effective and faster connection of renewables to the grid, but the fact that challenges remain can be demonstrated in the process involving the Beauly to Denny transmission line, which may have a negative impact on parts of my constituency. In addition, we must ensure that the distribution networks in our towns and cities are not subject to continued failure and breakdown. In my constituency in Alloa, there is sadly a history of supply breakdown. The last batch of multiple failures took place just days before Christmas, resulting in significant loss to retailers and businesses and disruption to domestic customers. I hope that Ofgem’s review of the compensation process and the interim report due in July will recognise that the current system fails in certain circumstances. Our network maintenance providers must be given the ability to recompense end users in a way commensurate with the frequency and impact of system failures. To do otherwise is grossly unfair.

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Of course, generation demands are relevant to our consumption. We all want the lights to work when we turn on the switch, and we want to pay as low a cost as possible for that service. Last year—and even today—I received complaints about energy prices and I want to take every step possible to have those costs reduced for domestic and business users. Our industry has done a lot to reduce energy consumption in respect of the climate change levy, but we must be able to offer competitive prices for the worldwide market. We have learned that lesson in recent months, if indeed we needed to learn it at all.

Where there are built-in options, business can chop and change its consumption from gas to electricity to oil, but domestic consumers do not have that choice. We must try to ensure that energy costs for domestic end users are as low as possible, and that means having modern, efficient generating facilities. Through social policy, the Government can and do deliver targeted help to those most in need, such as the winter fuel allowance for pensioners. We must work hand in hand with that to improve the insulation of our existing housing stock. That will reduce consumption and benefit both individuals and the environment.

The biggest challenge is with our historical stock. New houses are being built to ever increasing energy efficiency demands, but we can and must go further. When I first entered the house building sector in 1974, the insulation requirements were laughable compared with today, and those houses, and others built decades and centuries ago, are our biggest consumption challenge. We must also see falls in energy market prices passed on to consumers, and I call on energy companies to make clear their forward plans for price reductions as a result of falling world demand and a reduction in raw material costs.

The problems identified in the Ofgem probe into energy retail markets must be addressed quickly, and I urge the Government to take action if the industry and Ofgem are unable or too slow to do so. Increased costs for power card users are not acceptable, and we must look beyond the tariffs to see all related charges. If legislation is required to rectify that wrong, I hope that the Government will act sooner rather than later—I am sure that they would have the support of many hon. Members. Social tariffs need expanding and must be made more accessible. I ask the Minister to leave no stone unturned to ensure that such tariffs are available to everyone in Scotland who is entitled to them.

Energy is vital for our existence. In the past, Scotland has played a valuable role in that sector. It does so in the present, and I urge the Minister to take steps to ensure that it continues to do so in the future. Scotland needs a balanced energy policy. This should not be a debate about nuclear power; it should be about a balanced energy policy in which nuclear can be a player.

I support the move towards clean coal and carbon capture technologies. That could see significant investment and job opportunities in Scotland, including in my constituency. Scottish Power, which is near to my constituency and that of the hon. Member for Dunfermline and West Fife (Willie Rennie), hopes to be the first in the UK to produce a large, fully operational carbon capture and storage system to be retrofitted to Longannet by 2014. If that technology delivers the goods, there will
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be a reduction in fossil fuel emissions of up to 90 per cent and a whole range of new options for Scotland will open up.

There are an estimated 50,000 fossil fuel plants in existence throughout the world. China and the USA are the leaders in that method of generation. That Scotland has an opportunity to be one of the pioneers in carbon capture and storage makes me very proud, and I hope that the Minister will do all that she can to secure the investment at Longannet, which could lead to a growth in exports of that technology to the massive economies of China and the USA.

I have no desire to see powers transferred from Holyrood back to Westminster, but I am concerned that a devolved Government could impact on a vital policy such as energy in an indirect manner, to an extent that could be damaging to energy production and the economic future of the UK.

Investment in renewables has struggled in the current economic downturn, but I applaud the actions of the Government, which could see more than £1 billion invested in turbines and infrastructure around Scotland’s coastline. The Scottish Council for Development and Industry claims that Scotland can generate 50,000 jobs in the energy sector over the next 15 years. I urge the Minister to leave no stone unturned to secure those jobs for Scotland and futures for my constituents and to deliver a cleaner, greener future for our children.

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