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Mr. Swire:
When the right hon. Gentleman was the Minister for Energy, we debated the issue of North sea oil and how economically sustainable it was. At the time, we discussed the incentives to Scottish drilling companies, as opposed to English drilling companies. Is
he convinced that we are providing enough incentive to companies that may wish to explore in the North sea to reach oil that otherwise might be uneconomic?
Malcolm Wicks: I am pleased that, in the last year or so, the fiscal regime has become more sensitive to the current position of the UK continental shelf. The Prime Minister asked me to make recommendations, and I recommended that fiscal sensitivity to the North sea-the sheer cost of certain explorations-should be borne in mind by the Government. I think that I am on the same page as the hon. Gentleman.
Mr. Weir: Has the hon. Gentleman read the report from the Select Committee on the oil and gas industry? We made the point that small companies working in the North sea are having difficulties obtaining finance from the banks. Only Lloyds-HBOS is prepared to lend, and only to its existing customers. That is a serious problem for those companies.
Malcolm Wicks: I do understand that point, and I am sure that the Government are aware of it. One of the great dilemmas of economic recession in all fields, and certainly in the energy fields, is that while we can be sure that global demand will increase soon, there has been a significant decline-collapse would be too strong a word-in investment, and that is affecting not only the North sea but the renewable sector.
Mr. Binley: May I ask the right hon. Gentleman about the possibility of using North sea wells as carbon storage sites? Does he think that that would provide a real opportunity to extend the life of the North sea by-according to some estimates-an additional 15 per cent. of the available oil? Is that a real prospect or should we discount it?
Malcolm Wicks: I intended to mention the importance of CCS a little later, but the hon. Gentleman is right to suggest that the injection of CO2 will help with enhanced oil recovery. Elsewhere in the world, CO2 is being used for that purpose. Given current technologies, a lot of oil and gas is left behind during extraction from the North sea, and recently the industry and the Government have been discussing that matter. Solving it would not be without costs or difficulties, but it is an important item on the agenda.
To get back to my story, the North sea is in decline, as is nuclear, with perhaps only 15 per cent. of our electricity coming from nuclear-some of that electricity is above the Liberal Democrat Benches, so I give hon. Members a health warning about that one. At its height, some 30 per cent. of our electricity came from nuclear. The reactors are of varying ages, but they are old and need to be decommissioned, and then we will see the development of new nuclear reactors.
We know the story of coal, too. I do not want to get too much into the politics of it, but coal was devastated by a previous regime, albeit not for industrial purposes or because the then Government were early converts to climate change-although the new Tories might rewrite the history on that-but largely for political reasons.
There is huge potential in renewables, which I think we all support, although we need to support it in actuality, through onshore wind, and not just in rhetoric. However, as a percentage of all energy, renewables account for perhaps only 2 per cent. or so. The 15 per cent. target is the right target, but hitting it will be tremendously challenging.
In the meanwhile, in the period before we can build up new nuclear-that will be largely after 2020, with the first one perhaps in 2017-and in which we can bite down on energy demand and develop our renewables, in my judgment we will see significant imports of energy. Let me take the example of gas. I know that some of the estimates about the future-they are only estimates-are contentious. I know, too, that there are different official estimates. There is a perfectly reasonable debate to be had, but the trend is essentially as follows.
Only a few years ago we had a sufficiency of gas and we were exporting. Very recently we were self-sufficient, but we are now importing 20 to 25 per cent. of our gas. Some estimates-they are perfectly sensible estimates-suggest that by 2020 some 70 per cent. of our gas could be imported. Indeed, I have even seen the figure of 80 per cent. The more successful we are in reducing demand and bringing forward renewables, the more likely it is that 70 or 80 per cent. might seem an exaggeration. However, for contingency planning it is sensible to look at that issue.
Where will the imports come from? I have mentioned the Langeled pipeline from Norway, and there is more potential to build up our relationship with Norway, as I argue in my energy security report. That is important, because the gas from Norway is good democratic, human-rights gas, and that cannot always be said of other gas!
What is the agenda for action? Much of it has been touched on. Any sensible agenda, whether for energy security or climate change, starts with reducing energy demand and increasing energy efficiency. I subscribe to that position, but we need to recognise the sophistication and the broad nature of the approach that we need to adopt. Housing is of course important, and we can argue about the pace of change there. The development of zero-carbon housing by 2016 is important. We will see a great revolution in design and materials as we move towards higher standards of thermal efficiency in new build. How we integrate renewables into that will be crucial.
Obviously, there is also transport, appliances and other things that we are familiar with. However, there are also things that I do not feel so tutored about, in the range of various industrial and business processes, such as pumps, valves and advanced control engineering, which I was hearing about at a conference the other day. All those things are important and can be developed by industry to reduce demand. Indeed, there is so much that can be said about that.
Smart meters are important, but only if we link them to a public education programme, so that when people get their smart meters, they are told about a wider package of things that they can adopt, so that the whole community down that road, in that village or in that town gets behind the project.
Energy efficiency is item number one. The second item is cleaning up fossil fuels. Some of the environmental groups might not like it, but we will be using fossil fuels
for the foreseeable future. Indeed, the environmental groups will not stop the Chinese using them in future. We have to become one of the world leaders in clean coal technology and carbon capture and storage. I am very pleased by the Government's position on this. As an Energy Minister, I was frustrated by the pace of change, but no one has ever done this around a coal power station. We are moving pretty rapidly in the right direction, but let us become a world leader and help China and others to develop this technology.
It is difficult to overstress the importance of CCS. It is not just another thing. Unless we get to grips with the challenge of CCS globally, all will be lost in terms of global warming, given that most of the energy that we use in the years to come is going to be obtained by burning fossil fuels. There will be huge technological challenges, including where to store, the fact that storage is very expensive, and the importance of the carbon price. There are all sorts of issues around financing, and the emissions trading scheme is very important.
My next heading is gas. I make various recommendations about gas in the United Kingdom in my report, to which I know that the Government will respond before long. I am not trying to get the Minister to respond to it this evening. I worry about a new dash for gas. It is easier to build gas power stations than nuclear power stations, and it is probably easier to get planning permission for them than for large-scale wind farms. There is a danger of becoming over-dependent on gas, with all the implications that that has for imports.
I raise three points about gas for the Government in my report. One is that Britain, compared with many other European countries, does not have in place significant numbers of long-term contracts for gas. We tend to contract with the suppliers and countries involved on a far shorter-term basis, and we often buy gas on the spot market. I can see advantages in that, but I can also see the disadvantages for our security of supply, and the Government need to address that.
The second issue relates to the supply obligation. We place on our supply companies a supply obligation: the Centricas, EDFs and Scottish and Southerns of this world have to supply gas to us. What does this mean in practice? When I produced my report-with the help of a very able team from the Department of Energy and Climate Change-I found the gas supply obligation to be a bit like jelly: I could not get to grips with it.
When I questioned key institutions on this matter, they recognised that all was not well. Let me spell it out. There is no way in the present regulatory system for National Grid or the regulator to establish whether there is likely to be sufficient availability of gas, in aggregate, in any coming period. That is not to say that the gas will not be there; it will be bought on the spot market or short term, but what would happen if we were to have another situation like Russia versus Ukraine? We had such a situation once, or possibly twice, during my tenure in office. Combined with a very cold winter in Europe, that created real difficulties for European energy supply and for us in the UK. I would therefore like to see greater clarity in the gas supply obligation, and I make that recommendation in my report.
The third subject related to this is gas storage. It is quite easy for us to say that we need greater gas storage capacity. It is like motherhood and apple pie: we all want more gas storage. To defend where we are from an
historical perspective, I would say that our gas storage area was the North sea. We had plentiful supplies and we were self-sufficient, but that is now in decline. We therefore now need to develop gas storage, and that is not quite so easy as some people make it sound. Are we talking about commercial gas storage, or about strategic gas storage? If we are talking purely about the former, the gas will be sold to the highest bidder.
The reality at the moment is that our main store of gas-the Rough storage, which is administered by Centrica-is a store for gas that is owned by the different supply companies in Britain, including the French and German companies. Last winter, things were all right-ish, but if I had still been Minister, I would have been looking at the situation day by day, as I did in earlier winters. I am almost sure I am right in saying that, at that time, German supply companies were taking gas out of Rough storage and returning it to continental Europe. They had contracts to supply gas there, so we cannot blame them, and as I understand it there is nothing to stop that gas-we did not stop it-going to continental Europe at quite a difficult time. I put it to the House that this is quite a difficult issue.
I believe either that we need strategic gas storage-gas that will be in the control of a democratic Government, subject to parliamentary accountability-or, if the gas storage is commercial, that we will need to explore the fact that the British Government under European law have a right to say that in extremis or in emergencies, some of that gas has to stay here in the UK. If it can simply go hither and thither in a crisis, it is not the kind of gas storage that many are calling for.
Bob Spink (Castle Point) (Ind): Will the right hon. Gentleman give way?
Malcolm Wicks: I have only one more point before coming to my conclusion, and others want to contribute, but I will give way to the hon. Gentleman.
Bob Spink: Is the right hon. Gentleman aware that some of the imported gas will come in the form of liquefied petroleum gas and liquefied natural gas, and that some of it comes to Canvey island where it is stored very close to residential houses? He may be aware that there was a leak there, when 140 or so tonnes of LNG escaped and partly became an unconfined vapour cloud. The Health and Safety Executive is currently pursuing a possible criminal investigation following this incident, which put my residents at great risk. Does he accept that the safety of residents and communities must always be put first by the Government?
Malcolm Wicks: Of course. We recently had the report on Buncefield, so it is not just a problem of LNG. The point applies to virtually every kind of energy source that we are talking about. I agree that LNG is important. The Milford Haven terminals have been opened and we will get quite a substantial supply of LNG from Qatar in the future. I do not think that the hon. Gentleman is arguing that we should say no to it; the issue is about being properly strict-I believe that we are being properly strict-about the health and safety considerations.
Mr. Swire:
I am grateful to the right hon. Gentleman for giving way a second time. To answer his question about the reserve storage of gas, it may well be motherhood
and apple pie, but given the security issues involved, would it not be prudent and good sense to enshrine in law a statutory requirement to have a certain number of days of reserve, as we have learned happens in France and Germany? This is not impossible; it is something that could be done very simply, and we should remember that we went down to about four days' worth of gas last year.
Malcolm Wicks: The short answer is yes. We need to have that requirement for commercial storage-my guess is that the Government would want to explore the legalities around that, given the single market and so forth-which would be perfectly acceptable in my judgment; but if that is not possible for legal or other reasons, we need strategic gas storage, which is very expensive-much more expensive, I am advised, than strategic oil storage. I welcome the hon. Gentleman's strong interest in this subject. Some may think it a grey area of debate, but given our current dependency on gas, it is a very important one. In my judgment, import dependency is going to grow in significance.
I want to mention two other areas. I do not need to say much about renewables, as we have already discussed the importance and huge potential of renewable energy from the sun-even in Britain now-the seas, the wind and from biomass. We also know about the importance of hydro. It may not be as important here as in Sweden or Norway, but we are able to explore it on a smaller scale in imaginative ways. I, too, am excited about the potential of marine, wave and tidal energy, but I need to caution that this is very new technology. Yes, British companies are very good at it, and we could truly become a world leader as a result of our technological, engineering and entrepreneurial flair and the natural habitat in which we live as an island people. As I say, however, this is new technology and we should not exaggerate its contribution over the next 10 years. The 15 per cent. target for renewables is absolutely crucial. When I say that it is demanding, this is not a code for saying that we will not do it, but I put it to the House that this is a tough one and we will need to stretch every sinew to move there.
Finally-I am sorry for having spoken so long, but there were interventions; I will blame them, anyway!-I come on to nuclear, which I know is controversial. I respect the position of the Liberal Democrats-they are wrong, but I respect their position. I believe public opinion has moved more in the direction of nuclear. I was privileged to lead the review on energy policy-Tony Blair asked me to do it some years ago now-which said yes, the Government would support and, where possible, facilitate the development of new nuclear. I believe it is important for climate reasons-some environmentalists still cannot quite make up their minds whether they hate nuclear more than they hate global warming, although some are changing their position, which I welcome.
In my judgment, as well as being crucial for climate change reasons, nuclear is crucial-I am almost saying equally crucial, but I am not sure that that is scientifically valid-in terms of energy security. In future, faced with import dependency, we need to do two things. We need to be as smart as possible in our foreign policy on import dependency so that we are not over-dependent
on any one country, any one company, any one region-or any one fuel, which is why I support clean coal. The other side of the coin is that we need to build up our own indigenous sources of energy-energy that we can produce for ourselves, hence my commitment to both nuclear and renewables. I go rather further in my report than perhaps this Government and this Parliament are prepared to go by saying that if by around 2030 we could have 35 to 40 per cent. of our electricity coming from nuclear, that would be a sensible place for Britain to be.
Mrs. Maria Miller (Basingstoke) (Con): The right hon. Gentleman talked about public opinion having moved on the nuclear debate, but does he believe that we can learn lessons from countries such as France and Canada, which have far higher levels of public acceptance for nuclear power? Does he think that there is still further work to be done there, as this could be one of the continuing sticking-points?
Malcolm Wicks: There are lessons to be learned: we mentioned health and safety in respect of LNG, so it needs to be health and safety times 100 for nuclear. The safe disposal of nuclear waste is another huge issue-also a huge industrial and jobs opportunity-that needs to be tackled. We need speed, but we need to take the public through the issues with great care. As I say, I am convinced that in terms of national security, the answer on nuclear has to be yes.
The Secretary of State made an important speech focusing mainly on climate change. I understand the reasons for that at this time, given the science and given Copenhagen, but my report, at the request of the Prime Minister, is also telling the Government that energy security as an aspect of national security needs to be taken very seriously. Albeit in due course rather than tonight, I look forward to the Government's response to my report.
5.58 pm
Mrs. Jacqui Lait (Beckenham) (Con): I hope that it will not embarrass my next-door constituency neighbour, the right hon. Member for Croydon, North (Malcolm Wicks), if I say that that was one of the most interesting speeches I have ever heard on the security of energy supply, which is a crucial issue that needs to be resolved and should have been addressed much earlier than when the Government asked the right hon. Gentleman to prepare his report.
I recall during my young adulthood in Scotland how we had to deal with the discovery of North sea oil and gas, yet now as I prepare to retire we are looking at how to reduce quantities of oil and gas. It is an issue of which I have been conscious for a long time. Given that I live close to Dungeness power station, I am also conscious of the ageing of our nuclear power stations-I nearly said our nuclear fleet. It is a great sadness to me and to many on the Romney marsh that the Government have so far ruled out the building of a third power station at Dungeness on the grounds of what Natural England said rather than on what I would have thought was the more logical ground of the potential for movement of the shingle. I believe that, engineering-wise, that problem could be solved. It was fascinating to listen to the right hon. Member for Croydon, North.
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