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That is a point of view, but as was pointed out earlier, there is one thing being done in this country that is not done elsewhere, and the Minister said it herself. No other country has a statutory funding mechanism. She has talked about £9.5 billion from the levy for four demonstration plants. That is a considerable amount of the investment that will be needed for those four plants, but the money will not come out of thin air; rather, it is money from the levy on the energy companies, the cost of which will be met by the consumer at the end of the day. We are therefore talking about giving £9.5 billion of consumers' money to the energy companies to demonstrate CCS, and possibly also for retrofitting.
Earlier, the hon. Member for Cheltenham (Martin Horwood) mentioned the increasing scepticism about climate change shown in polls of late. However, another type of scepticism is increasing, and that is scepticism among energy consumers, who are being asked to bear more and more costs, for environmental issues, helping with the grid and so on. As we are in a period when wages are not rising and are not likely to rise for the foreseeable future, yet energy bills continue to rise, and more and more is being put on those bills, there is a squeeze on the energy consumers who pay them. If we are going to take consumers with us down this route, we have to convince them that we are getting value for money for the huge amounts that we are putting into CCS and other things. One way to do that is by putting the EPS in place.
I understand the point that the hon. Member for Sherwood made about timing, and he is right. A year is a short time when we are talking about CCS, which we have talked about for many years but have never really got off the ground, for various reasons that I could go into at length, but will not. We have to show the consumer that we are putting real pressure on the companies to perform, to ensure that the money is well invested, that we will have a CCS system that works and reduces carbon emissions, that the cost is worth while for reducing the long-term emissions into the atmosphere and for helping to meet our challenging targets for carbon emissions reduction.
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I understood the points that the Minister was making earlier, and I do not disagree with a lot of them, but the reality seems to be that the only new coal plants that will come into being in the next few years will be those sanctioned through the levy. No one in their right mind will operate a coal plant without the levy.
To digress slightly, we talked about gas earlier, and I made the point in Committee about the terms of the national planning statement in England, which I think will prevent new gas plant from being developed. We took that up with the Minister, Lord Hunt, when he appeared before the Committee, and he promised to look into the matter again. This needs to be sorted out, because it could stand in the way of the development of gas plant.
The EPS will show a determination to ensure that consumers are getting value for money and that they are actually going to get somewhere with these companies. It will show that we are not just giving them money to build new plant. This brings me to my worry about new
clause 8. I do not doubt the Minister's sincerity on the new clause. I do not doubt that the Government intend its effect to be that, in reviewing the measure in future, we will consider an EPS if we are not making fast enough moves towards decarbonisation. To me, however, that is not what the new clause actually says.
The new clause says that we will look at
"whether coal-fired generating stations for which appropriate consent is given on or after 1st January 2020 that are built in Great Britain can be expected to be constructed so as to enable use of carbon capture and storage technology on all their generating capacity".
"A report under subsection (1) must also include a review of whether, having regard to the other matters contained in the report, any government policies should be revised".
It does not talk about whether policies should be strengthened, or whether we should consider introducing an EPS; it simply talks about whether they should be revised.
We should bear in mind the fact that by that time the energy companies will have invested money in the plant, and the Government will have invested £9.5 billion-perhaps a lot more. If, disastrously, carbon capture and storage is not working economically, there will be massive pressure on the Government of the day. Let us remember that 2020 is two Parliaments away, and with the best will in the world, whatever happens later this year, the Minister is unlikely still to be in her post-no offence meant to her, of course. In those circumstances, there will be massive pressure on the Government of the day to allow the plants to continue to operate without CCS because of the money that has been put in, and because of the effect on the energy system if they were taken out of commission.
For all those reasons, it seems perfectly sensible-indeed, absolutely essential-that we make it clear to the energy companies from the outset that there must be an emissions standard and that they must meet it. We are putting this money in to help us to achieve our carbon reduction targets, and if we do not do that, there is real danger ahead. I also suggest that we would have grave difficulty in convincing the energy consumers-who, ultimately, are paying for all this-that that is the right thing to do. I will support the emissions target tonight, and I hope that the measure goes through. I foresee great difficulty if it does not.
Dr. Whitehead: I agree with my hon. Friends the Members for Sherwood (Paddy Tipping) and for Morley and Rothwell (Colin Challen) that this debate might, unfortunately, be characterised as a debate between vertebrates and invertebrates. I believe, however, that it is about whether a very good existing policy on carbon capture and storage should be strengthened, or whether, in seeking to strengthen it, we could end up with no carbon capture and storage, and no coal plants, at all.
The debate is also about where we want to get to in terms of using low-carbon coal, if we decide we are going to use further coal power for energy production. It is also about whether we have new coal plants-if we do not have any, we will certainly not have any carbon capture technology, because the one follows from the other. As I said in an earlier intervention, the debate is about whether we take seriously what we are going to do about existing coal plants for our future energy
economy, bearing in mind that we want that future energy economy to be low carbon, and perhaps to involve some coal for low-carbon energy.
If we want certainty about what will happen to investors in new coal plant, as well as investors in existing coal plant, if they continue to use those assets to develop energy-or not, as the case may be-we need to look no further than the Committee on Climate Change. In a recent report, it said explicitly that
"there is no role for unabated coal-fired generation beyond the 2020s on the way to an 80 per cent. emissions reduction in 2050".
That is a very clear statement, which is, in fact, rather more radical than an emissions performance standard, in saying that by the 2020s investors in coal-either in existing power stations or new ones-will not be able to use those stations for energy generation unless it is abated. Full stop. That seems to me to provide complete certainty about the future basis for investment. This is essentially the position we are now in, as we look at carbon capture and storage.
The question then arises: if we adopt one or more of these amending provisions, where do we stand in terms of the aim? If new clause 15 were adopted, the No. 1 point is that no new coal-fired stations might be developed in the first place-for reasons connected with the economics of developing the power stations and the imposition and overlay of an EPS on an existing series of projects for new coal-fired projects. As new clause 15 specifically points out, the suggested EPSs should apply only to new coal-fired plant. We could thus end up with the worst of all worlds-with no new coal-fired power stations and with no emissions standards for existing coal-fired power stations. That would indeed be a magnificently perverse outcome for those who claim that they are fighting on behalf of the vertebrates against the invertebrates.
Dr. Whitehead: I believe that my hon. Friend conceded that point in response to my earlier intervention. That seems to me to be a possible problem with new clause 15.
Alan Simpson: My hon. Friend is right that that might be a problem with new clause 15. However, he should bear in mind what successive Ministers have repeatedly said-that there is nothing to stop the Government introducing an EPS on their own account now. The new clause could cover the aspects that are omitted in relation to existing plans, but the real question is whether there is the political will for an EPS. It actually comes down to something as fundamental as that.
Dr. Whitehead: I take my hon. Friend's point, but we are debating real amendments before us, which would have a real effect, so if we go into the Lobbies to vote on those provisions, the outcome will be that one amending provision or another will be passed. New clause 15 clearly states that an EPS of any description-it is not quantified-will apply only to new power plant.
Here, I am sorry to say, I am reminded of the contribution of the right hon. Member for Wokingham (Mr. Redwood)-a man who lives and dies by markets-because he appeared to confuse markets with marketplaces. In energy, we do indeed have a very constrained market, but we also have a marketplace for balancing our energy supply between what is demanded, which is variable,
and what is supplied, which is also variable. Not only do we have a variable supply, but we have the introduction of a variable-in a different sense-renewable supply against a baseline supply which is not variable, but which may come within the marketplace on a variable basis.
All those elements must be balanced against each other if we are-as the right hon. Gentleman said-to keep the lights on. If we wish to keep the lights on, as well as moving to a low-carbon economy and retaining an element of coal, we must take careful account of how the existing coal-fired power stations-not necessarily the most economic-remain in the marketplace in terms of the balancing mechanism that I assume will continue be used to ensure that our energy supply demand matches our energy supply over a period of years.
If we are to do that, it is imperative that the existing coal-fired power stations are clear about two facts. They must be clear about the fact that they will not receive rebates after the 2020s, and they must be clear about the fact that a number of them will stay on line after 2015-16. We should consider what will happen if, as a result of anything that we do today, a commercial decision is made that causes those 10 stations to close, given that they will not be receiving rebates for very long.
The hon. Member for Harrogate and Knaresborough (Mr. Willis) mentioned flue desulphurisation. The decision in that instance was made not on the basis of whether it was suitable for those stations, but on the basis of the economics. A number of coal-fired stations were closed under the large plant directive because it would not have been economic to fit desulphurisation equipment. The 10 stations that will continue to operate do have that technology, and can operate for a while: indeed, Drax can operate for a number of years.
The question that we must ask ourselves is: do we wish those power stations to disappear from the marketplace in the not too distant future? If so, we shall be faced with the additional prospect of either the market or the Government building new power stations and mothballing them in order to keep the marketplace working in terms of energy supplies. That is a second possible perverse outcome of what we think we are trying to achieve today.
I believe that new clause 8 represents a considerable improvement on what we were offered in Committee. It sets out what we should seek in terms of progress; it sets out our aims; it sets out how we can get there; it sets out what we do if we are beginning to fail to get there; and it sets out the ultimate outcome. That seems to me to ensure that the outcomes that we want will be achieved and the risk of perverse outcomes minimised. I therefore cannot support new clause 15, and I urge the House to support new clause 8.
Mr. David Anderson:
It is impossible for us to conduct this debate without understanding the background: what is actually going on in the world of energy supply. The debate is long overdue, and, given the position in which we now find ourselves, perhaps too late. Ofgem's recent report "Project Discovery" has been a wake-up call for many-perhaps for Ofgem more than for anyone else. This morning, at a meeting of the Energy and Climate Change Committee, its chief executive, Alistair Buchanan, spoke to us along with some colleagues. He told us that he had been surprised and exposed by events that he
had not anticipated. I was quite concerned when he said that. He mentioned six things that identified his concern about the stage we have reached in developing an energy system that is fit for the future. I think that most people who are involved in energy debates would understand five of them.
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Mr. Buchanan spoke of reasonable doubts about security of supply. Those have existed for some time. He also mentioned an overall rise in prices since 1998, climate change and the legislative programme from Europe, the closure of coal plants-which has been dictated by that programme-and the risk posed by gas imports. That risk has been clear for at least five years, given, for instance, the closure of pipelines from Ukraine. A huge element has been the length and depth of the financial crisis. It is clear that Ofgem, along with many other people in the country, could not have been expected to forecast that or work its way around it.
The country faces an energy challenge that is probably unique. Much of what we have is not fit for purpose. In particular, we face the huge issue of security of supply, while seeking massive investment from the markets. Ofgem predicts that we will need to raise £200 billion by 2020. That is a huge sum of money, and Ofgem put it into context today when it said that £100 billion was invested in the water industry over 20 years, and we now need £200 billion over 10 years-twice as much over half the length of time, when we have had serious economic problems. We are certainly in straitened times.
Alistair Buchanan highlighted that in his report. "Project Discovery" states that
"although investor confidence appears to be recovering...there is still a question as to whether the high levels of investment needed...will be available at a reasonable cost".
I asked the Minister earlier to give us an idea as to what the cost to the consumer would be, but she was unable to do so, because we do not know. We do not know what we will be charged by the private companies going forward.
Alistair Buchanan went on to say that
"we are entering a phase of substantial new investment in energy markets globally...If the GB market is perceived as a higher risk than those overseas, returns will need to be higher in order to attract sufficient investment. Furthermore, international competition for constrained skills, equipment and other resources could push up costs."
There is a huge difference between that and what he said four years ago. In a speech to the International Energy Agency, he said that the development of gas coming into Teesside
"shows that the markets deliver entrepreneurial solutions and that markets deliver."
They are clearly not doing very well going forward.
What is the situation in the country now? We are importing 43 million tonnes of coal a year, and we are burning 65 million tonnes of coal a year, and we are running out of UK gas and oil. We are also in limbo between old nuclear build and new nuclear build. We are closing down all the coal-fired power stations, too, and the electricity grid is clearly not fit for purpose for this century and going forward. There is also a huge issue of lack of skills. One point that has been continually repeated in our Select Committee debates is that energy
companies have not invested in skills because of the overriding objective of keeping prices down and giving shareholder dividends. Although we need to develop new technologies, we do not have the people with the skills to do so. The industry has not developed these new skills, and we are dependent on coal and gas imports from very unstable states.
The right hon. Member for Wokingham (Mr. Redwood) spoke earlier about his concern about where our coal comes from. Let me repeat something that I have said more than once before in this House, especially as the Minister with responsibility for coal is present. There is a moral point to be made about the fact that we import coal. We are importing coal from China, where 6,000 miners a year are dying. Tonight in China, 20 men will not go home because of a lack of safety standards. In Ukraine, for every 1 million tonnes of coal that is got out of the ground, seven people die. That is the reality of getting cheap imported coal. If we are happy with that, we are not the people we should be in this country.
Investors in the industry are constantly looking for support from the public purse. From all the debates we have had over the past 25 years about the privatisation of public services, I have understood that the whole idea is to transfer the risk: if we transfer the services out of the public sector, we also transfer out the risk. The truth, however, is that whenever the risk returns, these investors are suddenly standing with their hands out, and with their hands in our pockets, demanding that our customers and electorates pay for their shortfalls.
The European energy system works in a different way from ours. In the rest of the European Union, countries base their energy debates and demands first of all on social obligations. We base ours on price-led mechanisms, so it is no wonder that when times are tough gas goes into Europe and out of Britain. Twenty years have passed since we were told to "Tell Sid." Well, the chickens are coming home to roost, because companies here need to find £200 billion and we are on the back foot. The companies will be coming to the Government-regardless of which party is in charge-and saying, "We need you to help us. We need you to help us at a time when money is more expensive than it has probably been for a long time." We are paying the price for being in an ideologically driven situation, and it is the very same ideology that got us into this mess in the first place.
This Bill is a small step towards putting some of that right. As has been acknowledged by Members on both sides of the House, there is no doubt that a significant sea change has taken place in the past two years, particularly with the creation of the new Department and the new drive to try to put the British coal industry, in particular, and the British energy system back where they should be. Nobody wanted to talk about energy during the first three years that I was in this House. It took the huge petrol price increases of two years ago to frighten people; the reality was that we were being held to ransom by the oil companies and we needed to start doing things. If that has been a push in the right direction, thank God it has.
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