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28 Jan 2010 : Column 360WH—continued
I am pleased that the Minister was given the chance to give an initial reaction to the debate. I noticed a slight change in his tone: he moved from saying, "We are
leading the world" to, "This is not a race." That is the argument my children tend to use: the one who wins the race says, "I am the winner", and the one who comes second says, "Well, I wasn't actually racing anyway." We must recognise that there is a race. There is a race against time, because we do not have time on our side if we are to get the new capacity built and implement the measures necessary to reduce our carbon emissions, and there is also a global race to develop the technology, so I really do see this as a race.
There are, of course, areas for competition, but it is our view, and that of many others, that Britain is in a unique position to lead the world on that. We have the skill-sets from the North sea oil and gas industry, which can be used for the sequestration technologies that will be necessary. We have a need, we have the many years of coal supply left and we have some of the best scientists in the world operating in places such as Imperial college, Edinburgh and elsewhere. It would be an absolute tragedy if in 20 years' time we found that CCS was a global technology, but a technology that other countries had mastered. We think that we should have a real vision of Britain leading the world in the commercial development of those technologies.
The report refers to a disappointment at the lack of progress. I think that we all accept that things have improved, but the words my hon. Friend used-"appallingly slow" and "scandalously lethargic"-summed up the earlier approach that was taken on the development of that technology. That has had a significant impact on the UK. The initial decision to go purely for post-combustion technology meant that work being done on pre-combustion technology, notably in Peterhead and some other projects, was lost. In the evidence given to the Energy Bill Committee, people made it clear that those projects were lost for good for Britain, now that Abu Dhabi has the project from Peterhead, and that we will have to struggle to catch up.
Jeff Chapman, chief executive of the Carbon Capture and Storage Association, told the Committee in evidence that it was now likely that China would be the first country to get a commercial-scale CCS coal plant operating and that Abu Dhabi would be the second country to do that. Therefore, we have lost out, and in international terms that is a matter of significant concern. The Chairman of the Environment and Climate Change Committee, the hon. Member for Sherwood (Paddy Tipping), said that it appeared to be a competition without end. In the three years that that competition has been running in the UK, Canada has had a competition that was over in one year, so there needs to be greater urgency if we are to see people really looking at investing in Britain in that technology.
The report states that there is an urgent need for a strategy for the development of CCS to give a strong signal to industry, and I absolutely agree. That is one of the reasons we tabled an amendment to the Energy Bill on the need for the Government to publish a road map within the six months after the Bill becomes an Act, should it do so. The Minister talked about a CCS strategy coming out in the next few months, but that is not far removed from a road map.
It is important to contrast what is happening in that regard with what is happening in other areas of energy policy, particularly nuclear. The road map put in place
for nuclear energy means that anyone looking at that sector from outside can see whose responsibility it is to do what and by when if the first new nuclear plant is to open by 2017-18. It is exactly that road map that is missing in areas such as carbon capture and storage, and even the roll-out of renewables. I hope that the Minister will reconsider that, and that on Report the Government will indeed decide that a road map would be appropriate.
The Minister referred to the office of carbon capture and storage, and said that the Government are consulting. In the same time that the Government have taken in consulting on that office, they managed to get the Office for Nuclear Development up and running. We need a real sense of leadership. The office has an expert chief executive-one of the finest people in the department-and I hope that he will be able to give things a sense of impetus and movement. We need to move forward with greater urgency.
If we do not have an overall strategy, we will find that we are without a national interest perspective. We will find a plant being developed in the Thames estuary, with its own pipeline to the North sea; we will see another plant being developed somewhere else, again with its own pipeline. It is critical to the success of the scheme that we have oversized pipelines, so that clusters can be developed in certain areas. There will not be many in the United Kingdom. The Thames is probably one, as is the Forth, along with Teesside and Humberside. Those will be the natural clusters, but it needs Government drive and a real sense of strategy to make it happen. I hope that the Minister will review the Government's position, and that they will accept its importance.
I would be grateful if the Minister said how we should move forward. The Energy Bill would put in place a levy, a funding system, but that still will not give an overall structure for the development of CCS. That was another issue at the heart of the report. We advocate that a body, perhaps an authority, should be set up to be responsible for the purchasing of the CO2 emissions, and for letting the contracts for the pipelines and the sequestration facilities. That would be unique in the world, and it would say to businesses large and small that the United Kingdom was determined to lead. I hope that the Minister will reflect on such initiatives and differences.
The hon. Member for North Southwark and Bermondsey (Simon Hughes) spoke of the need for gas to be incorporated. There is a tendency to focus on the coal side of the debate, but at some time gas will have to be incorporated. The Bill gives the Government the opportunity to do that. They can broaden its provisions from being related only to coal to include other technologies. I hope that the Minister will show that the Government's responses to the report are not hollow, and that they will use the opportunities that they have to drive change forward.
The Government say that 20 GW of new power plant has been consented; 12 GW of that, or 60 per cent., is gas. Gas will play an extremely important part in our energy mix for many years to come. The people building those plants are not building them for the next few years, to see us over the shortfall before the new plants come into use; they are building them with the expectation that they will be in use for 20, 30 or 40 years. For that reason, CCS on gas becomes particularly important.
That brings me to the question of the emissions performance standard. The Select Committee report contains 15 recommendations. The Government responded to 14; the 15th did not get a mention. I hope that the Minister will explain why. That last recommendation was about the importance of an emissions performance standard. There is broad support in Parliament for that. The Conservative party has been committed to it for some time; we believe that it will be a key element in driving investment.
An emissions performance standard that was set unrealistically high would drive away investment, but investors who are looking to invest hundreds of millions of pounds in new plant should know the framework to which they will be expected to adhere. That applies to coal and, in time, to gas. I hope that the Minister understands the strength of feeling across the House that an EPS would help secure investment by giving people certainty about the investment framework. It will help them to decide positively. It would also be useful to know why the Government did not address that question in their response.
The final issue is carbon price. The Select Committee report says that we cannot rely on the price of carbon through the EU emissions trading scheme alone to drive forward. That is absolutely true; we need only look at the fluctuations within the ETS to realise that. At times, the price has been about €30 a tonne; at other times, it has fallen to 8 cents a tonne. It is hard to make investment decisions based on something that fluctuates so wildly.
The Select Committee discusses a feed-in tariff or other method of support. I hope that the Minister will consider the alternative approach of putting a floor on the price of carbon, which would help secure investment across the board in low and zero-carbon technologies. That would be helpful for investors in nuclear, CCS and renewables. I hope that he will be able to indicate the Government's position. When he appeared before the Energy and Climate Change Committee a few weeks ago, he said that if the deal that the Government hoped for was not reached in Copenhagen, they would announce their way forward shortly afterwards. In the course of this week, we must declare our response to the Copenhagen agreement. If a carbon price announcement will be part of that, maybe he could share it with us now.
The report is thorough and is enhanced by its brevity and the clarity of its thinking and recommendations. I think that we are all united in wanting coal to play a vibrant part in the United Kingdom's future energy mix, but it must be genuinely clean and involve carbon capture from the outset. We share the Government's goal of having a significant number of plants. We have said 5 GW, with some degree of CCS in place, by 2020; the Government have mentioned 4 GW. We are in the same area on that issue, but if we do not have a road map or a strategy in place for delivery, it simply will not happen. I hope that the Minister can reassure us in his closing remarks and respond again to the important recommendations made in the report.
4.37 pm
Mr. Kidney:
With the leave of the House, may I say that this has been a serious debate about a serious subject? It is not just for the benefit of this country that
we must make carbon capture and storage work, as I said in my opening speech; it is for the benefit of the entire world.
I will respond directly to the points made by hon. Members before I end. I was grateful to the hon. Member for South Suffolk for acknowledging, among all the delays to which he referred, that the Government had introduced a regulatory regime for the storage of carbon dioxide. As I said in my speech, it was a world-leading step at the time. The European Union has caught up since then with a directive based on our legislation, although we now need to make some amendments to our scheme to comply fully with the directive.
On European funding that might assist the development of carbon capture and storage demonstration plants, the European Union has taken not one but two relevant initiatives. The first was the economic recovery package, through which the European Commission has effectively announced a number of projects that it intends to support. We read in the newspapers that one is Hatfield in the United Kingdom. I understand that the process is not yet concluded and that the European Parliament has not yet given those decisions its approval. Nevertheless, that is one route on which the European Union has made a decision. It is in hand and could benefit a United Kingdom project.
The second, which might have been the one that the hon. Gentleman had in mind, is that we in this country persuaded the European Commission and other Governments that from 2013 onwards we should set aside from the new entrant reserve of phase 3 of the EU ETS 300 million allowances for auction to raise funds for carbon capture and storage and renewables projects. That is a potentially large sum and could become available in several years' time. We are confident that we will make a good case to the European Union for a share of that money for projects in the United Kingdom in the time scale necessary to secure them successfully. The huge levy that we propose on the electricity bill of everyone in this country to help the private sector to make a success of carbon capture and storage could be diminished by the contribution that we secure from the European Union.
Another funding point that the hon. Gentleman mentioned was that in Budget 2009, there was an announcement of a £90 million fund to enable the participants in the first competition-the two that are still proceeding with competition No. 1-to proceed to the front-end engineering and design stage after the first stage of the competition. That money is indeed available and we hope to make an announcement shortly about the participant or participants being able to spend it.
The hon. Gentleman asked about Ofgem's expertise. We are confident that Ofgem has sufficient expertise. It deals with similar arrangements now in respect of the renewables obligation, for example, and we intend to give it a role in relation to the feed-in tariffs that begin in April. Again, we think that that role is within its expertise.
The hon. Gentleman asked about the review in 2018 and whether that would allow time to act by 2020 on the decisions that are made. 2018 is a tricky judgment call because there has to have been by then some demonstration of carbon capture and storage in order to make a judgment at all, so there is something that we have to
learn from, and then, as he rightly says, the case is urgent for rolling that out as far and as fast as possible if it is successful, and we want to do that by 2020. We happened on 2018 on the basis that with our own ambitions and now the European Union's ambitions, a number of demonstration projects will be starting by around 2015 and there should be time to learn and then time to act on the decisions that we make. I agree that it is a tight time scale, but equally I agree about the urgency of the issue.
The hon. Member for North Southwark and Bermondsey (Simon Hughes), in an intervention on me, asked about the 90 per cent. reduction in carbon emissions if CCS is successful with coal. I shall add to what I said then that the International Energy Agency cites that figure as its assessment. We can do better than 90 per cent. if we are prepared to spend more money, assuming that the technology is capable of being pushed that much further forward. For the sake of completeness, I should point out that today, some coal generators seek to reduce their emissions by co-firing coal with biomass and there is no reason why that would not continue in the future.
I thought that my hon. Friend the Member for Southampton, Test (Dr. Whitehead) did much better than I did in persuading the members of the Select Committee about the importance today of fossil fuels as part of the flexible base load in this country. As we develop, for example, much more wind power, with its variability, that flexible base load will be more not less important to the country. As we make the transition to the low-carbon future, we should not overlook the contribution that that base load will make. My hon. Friend made that point extremely well. Equally, because of that, he made the point that we have to make a judgment about the control of emissions on one hand and the times of need on the other. A good example that we can all remember is that this winter, when there was a shortage of energy to meet a huge demand in this country, it was the flexible fossil fuel base load, including coal, that came to our aid to ensure that we met that record demand.
On my hon. Friend's point that eventually we must get round to the retrofitting of existing power stations as well as the new ones that we are talking about, I am sure that that is a forceful argument, but in terms of the Government's position, we have focused our new interventions on new coal, for the reason that the hon. Member for North Southwark and Bermondsey gave, which is that when those power stations are built, they have a 40-year lifetime. Therefore, we think that that is the right priority, but I take the point about having to come back to the issue of retrofitting. That is why we have made the decision and announced that the levy could pay for retrofitting as well as for the first demonstration, and why we have said that we will review the situation in 2018.
My hon. Friend made the important point about sufficiency of storage for carbon dioxide. It is intended in this country that there will not be storage on land, so the surveys that have been done under the seas around this country are very important. He mentioned one survey; there have been several others, and certainly the British Geological Survey in 2006 is the one on which
we rely in thinking that there are 100 years-worth of storage of our carbon dioxide emissions in safe places under the sea. However, I take the point that, although some of that capacity might consist of oil and gas fields as they are exhausted of gas and oil, some of it might be aquifers and he is right that our knowledge of those aquifers and their security, in terms of their being a safe storage place, is not complete. So, to answer a question that the hon. Member for North Southwark and Bermondsey asked me, there is ongoing surveying work, to ensure that we have sufficient information.
To conclude that point, I met with representatives of the Crown Estate earlier this week-after all, the Crown Estate is our landlord of the seas-and they are very aware of the need for this transition from oil and gas fields being producers of oil and gas to being, in the future, the storage places for carbon dioxide emissions. They are very attuned to the need to help the industries-both the current oil and gas industries and the future carbon dioxide storage industry-to make that transition a smooth one.
I think that it was my hon. Friend the Member for Blaydon (Mr. Anderson) who mentioned enhanced oil recovery. Of course, carbon dioxide might be the injectant that would be readily available at a reasonable price to help with enhanced oil recovery. Again, in my discussions with the representatives of the Crown Estate, they were alert to that point. I would also just point out to Members that, under the world-leading regulatory regime that we have established as part of the Crown Estate, we conducted a consultation in the autumn of last year about the licensing system for carbon dioxide storage. In that consultation, we proposed that the licensees of existing oil and gas fields ought to have a limited window of opportunity when they could have first call on permits for their fields as stores for carbon dioxide.
That consultation has recently closed and I do not yet know how the market has responded. Furthermore, we certainly have not made a final decision. However, I just wanted to draw attention to that consultation to show that we are alert to the link between the two sectors and the importance of securing the assets that we have now as safe storage for the future.
I thank my hon. Friend for reminding me that energy efficiency comes first, before the trinity of fuel supplies that I mentioned to him. Of course, if we can avoid using energy in the first place, we will contribute both to fighting climate change and to our security of energy supply, and we will help those people who find it difficult to afford to pay their bills to reduce their bills. Also, for businesses it is a good thing to reduce their overheads if they can. So energy efficiency-every day-should come first, and I thank him for reminding me to say that.
My hon. Friend is right about the need for further work to be done on the transportation of carbon dioxide. However, as I said to everyone in my speech, the components of carbon capture and storage have each been tested and there is transportation today, just as there is storage today, that has been proved to be successful. It is putting all those components together that is the challenge for us.
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