The
Committee consisted of the following
Members:
Chair:
Mr
Philip Hollobone
†
Anderson,
Mr David (Blaydon)
(Lab)
†
Bridgen,
Andrew (North West Leicestershire)
(Con)
†
Connarty,
Michael (Linlithgow and East Falkirk)
(Lab)
Donaldson,
Mr Jeffrey M. (Lagan Valley)
(DUP)
†
Duddridge,
James (Lord Commissioner of Her Majesty's
Treasury)
†
Heaton-Harris,
Chris (Daventry)
(Con)
†
Hendry,
Charles (Minister of State, Department of Energy and Climate
Change)
†
Irranca-Davies,
Huw (Ogmore) (Lab)
†
Lee,
Dr Phillip (Bracknell)
(Con)
†
Menzies,
Mark (Fylde) (Con)
†
Whitehead,
Dr Alan (Southampton, Test)
(Lab)
†
Wicks,
Malcolm (Croydon North)
(Lab)
†
Wright,
Simon (Norwich South)
(LD)
Alison Groves, Committee
Clerk
† attended the
Committee
European
Committee A
Wednesday 2
February
2011
[Mr
Philip Hollobone
in the
Chair]
Energy
2020
[Relevant
Document: European Union Document No. 16302/10 on energy
infrastructure priorities for 2020 and
beyond.]
8.55
am
The
Chair:
Does a member of the European Scrutiny Committee
want to make a brief explanatory statement about the decision to refer
the relevant document to this
Committee?
Chris
Heaton-Harris (Daventry) (Con):
Thank you, Mr Hollobone.
It might be helpful to the Committee if I take a few minutes to explain
the background to document 16096/10 and the reason why the European
Scrutiny Committee recommended it for debate. The document sets out the
Commission’s views on the policy decisions needed in the next
decade to enable the EU to meet its energy and climate change
objectives, against a background where it argues that, for various
reasons, the existing strategy will not enable the 2020 targets or the
longer-term challenges to be
met.
The
document focuses on five priorities, the first of which is energy
efficiency. The Commission calls for a reinforced political commitment
to achieving 20% efficiency savings and says that it will present an
energy efficiency plan in early 2011. The second priority is an
integrated European energy market. The Commission says that existing
legislation needs to be properly enforced, infrastructure across Europe
upgraded, procedures speeded up and increased attention given to new
interconnections at external borders. It suggests that investment of
about €1 trillion will be needed by 2020 and that although most
development will be commercial, there could be a need for further
public money in the next financial perspective after
2013.
The
third priority is secure, safe and affordable energy. The Commission
suggests that although the market best guarantees security of supply,
safety nets are needed for the most vulnerable. It also says that the
EU must be a world leader in safe nuclear power and in the safety of
oil and gas exploration. The fourth priority is energy technology and
innovation. The Commission argues that a technological shift is needed
to decarbonise the electricity and transport sectors by 2050 and that
that requires Europe-wide planning. It says that it intends to launch
new large-scale European projects and to ensure long-term
competitiveness.
Lastly,
we come to the external dimension. The Commission argues that the
common purpose shown on energy and climate targets does not yet apply
to its external energy policy. It therefore intends to present
proposals in 2011 covering further integration of energy markets with
the EU’s neighbours and strengthening relations with suppliers
and transit
countries.
Although
this is the third major review of EU energy strategy produced in a
little under four years, the European Scrutiny Committee sees this as
an area of manifest
political, economic, environmental and social importance. It therefore
recommended document 16096/10 for debate in European Committee to
provide the present House with its first opportunity to consider EU
policy in this area in
detail.
The
other document before us—document 16302/10—is a
communication on energy infrastructure priorities. The Commission
believes that a major shift is needed in how infrastructure is
developed and that there needs to be a European strategy and funding.
It intends to introduce this year a comprehensive road map towards
2050. That will present energy mix scenarios, describing ways to
achieve the long-term decarbonisation goal and the implications for
energy policy decisions. In the meantime, document 16302/10 is intended
to identify the infrastructure needed to meet the 2020 objectives. The
European Scrutiny Committee believed this to be an important document,
which would best be considered in the context of the debate recommended
on the wider “Energy 2020” communication—document
16096/10.
The
Chair:
Thank you. In a moment, I will call the Minister to
make an opening statement. That statement should be largely factual and
explanatory and should last for no more than 10 minutes. No
interventions may be taken during that speech. I call the
Minister.
8.59
am
The
Minister of State, Department of Energy and Climate Change (Charles
Hendry):
It is a pleasure to serve under your
chairmanship, Mr Hollobone. I hope that my statement will be entirely
factual and helpful to the debate. It could not be more timely, as the
European Council meets on Friday to discuss these papers and energy
issues more generally. In November, the Commission published its
“Energy 2020” strategy and a communication on
infrastructure priorities, setting out its views on how the EU can meet
its energy and climate change objectives. I broadly support the
Commission’s general approach in the
communications.
First,
I strongly welcome the focus on energy efficiency. That remains the
most cost-effective way to improve energy security and to reduce
emissions while boosting competitiveness. That is why we have made it a
top priority domestically in the UK. Priorities must be the
implementation of existing legislation, for example on buildings and
transport, and further proposals on ambitious product
standards and labelling—specifically implementation of the
eco-design and energy labelling
directives.
Secondly,
I strongly support the central role given to infrastructure development
in both communications. It is vital that Europe should develop better
interconnected grids that improve security of supply and the
cost-effectiveness of low-carbon technologies. Implementation of the
third package of energy market legislation is crucial. It should
provide the stable and predictable regulatory framework necessary to
attract the enormous quantities of commercial investment that are
needed and enable the regulators to play a key role, not least in
tackling any regulatory barriers to cross-border
projects.
Thirdly,
the EU must match its ambition on networks with action both to drive
the development and deployment of low-carbon technologies, which will
generate cleaner energy more efficiently, and to help us to reduce our
energy consumption. The strategic energy technology plan is a good
example of how the EU can add value to individual efforts by member
states; we must continue to make progress on implementation at EU and
member state level.
Fourthly, the
Commission rightly highlights the importance of diversifying the
EU’s energy supplies and of the EU’s external energy
relations. The EU needs to build on the success of the current external
energy policy; that includes the spreading of EU market norms to our
near neighbours through the Energy Community treaty, and the role that
the Commission has played in helping member states to resolve bilateral
disputes with major third-country suppliers, by acting as a defender of
EU legislation. The EU should strengthen its existing relationships
with strategic partners such as Russia and Turkey and build new ones,
for instance with suppliers and transit states along the southern
corridor. External energy relationships must also encourage greater
co-operation on low-carbon technology and energy efficiency, such as
work with China on carbon capture and
storage.
The
European Council represents a real opportunity to set the long-term
strategic direction for European energy policy and to inject political
momentum into Europe’s move to an energy-secure, low-carbon
competitive economy. The UK’s objectives for the Council are to
set a long-term strategic vision for the move to a secure, sustainable
and competitive low-carbon economy by 2050; to provide renewed
political momentum for the EU to meet its 2020 renewables and emissions
targets; to agree on Europe’s high-level infrastructure
priorities and practical action to facilitate the necessary
infrastructure investment; to reaffirm the need to improve the way EU
energy markets work and increase their integration; to support greater
development and deployment of low-carbon technologies; and to secure a
step change in energy efficiency. The Council should also endorse the
importance of the EU’s external energy policy, and should
involve both the Commission and member states in
that.
The
Council should recognise the huge energy infrastructure investment
challenge ahead. The Commission estimates that €1 trillion could
be needed across the EU by 2020. The majority of the investment
required has to be delivered by the market. To achieve that, the EU
must implement and enforce existing legislation, to get gas and
electricity markets working properly and to create a stable and
supportive regulatory framework. Public funds should be used only in
cases of real market failure where infrastructure is unable to attract
commercial finance, but provides wider
benefits.
The
Council should agree on Europe’s high-level infrastructure
priorities—in particular the need for a super-grid delivering
low-carbon electricity across Europe. The North sea offshore grid
initiative, of which we are active members, is a practical first step
towards developing interconnectors and improved energy efficiency. The
initiative also fits well with the all-islands approach that we have
suggested to the British-Irish Council, with the aim of exploring how
to make the best use of the energy resources in and around our
islands.
Action
on energy at EU level can help in securing Britain’s objectives.
Collaboration with EU partners can increase our energy security,
enhance our global climate change efforts and help our green growth
agenda.
The
Chair:
The rest of this morning’s proceedings are
in two parts. After a question time, in which any Member can ask a
question or series of questions, we will move into a formal debate, so
those who expect to make a speech need to hold fire until the next part
of the proceedings.
We are now
into a question time arrangement. I must read out some formal guidance.
We have until 9.55 for questions to the Minister. May I remind Members
that these should be brief? It is open to a Member, subject to my
discretion, to ask related supplementary questions. You can ask
questions one at a time or you can ask a string of questions. If you
want to ask a string of questions it would be helpful if you could
indicate that to
me.
Huw
Irranca-Davies (Ogmore) (Lab):
I welcome your careful
stewardship of the Committee’s proceedings today, Mr Hollobone.
I wish the Minister well at EU Council on Friday. We are broadly
singing from the same hymn sheet on this. I have one specific question:
what are the major advantages within the package and the action plans
that follow from it for the UK consumer and UK business? What are the
potential pitfalls for the UK consumer and the UK as a business
entity?
Charles
Hendry:
I am grateful for the shadow spokesman’s
supportive words. I should correct one point. The meeting on Friday is
for Heads of Governments and so I shall not be attending. As he will
appreciate, that would be deeply presumptuous and inappropriate, but I
know that he will extend his warm words to the Prime Minister who will
be there representing our interests.
The interests
of consumers are a critical part of this and are at the core of the
third package that comes into force later this year and tries to spread
to other parts of Europe some of the benefits of competition that we
have seen in the United Kingdom. As the hon. Gentleman will be aware,
many millions of consumers in the United Kingdom receive their energy
supplies from countries based elsewhere in Europe, but not a single
customer in France and Germany receives theirs from British companies.
We want to open up that market. We think that creating that opportunity
brings benefit to British consumers as
well.
In
that respect, the other important aspect is research and development
through the strategic energy technologies programme, helping to bring
forward new technologies and to make significant gains in low-carbon
potential. That will be critical. Then there is the focus on
interconnections, gas pipelines and electricity interconnections, which
help to provide greater security of supply and to smooth out peaks in
demand, thereby addressing more constructively the associated price
spikes that can cause problems to
consumers.
Malcolm
Wicks (Croydon North) (Lab):
I have two questions at this
stage; there might be a third later, if that is permissible. The first
pursues the theme of energy market liberalisation, which has been a UK
objective for a number of years. It is fair to say that progress has
been made on that in recent years. What does the Minister now see as
the major barriers across Europe to market liberalisation? What is the
Government’s strategy for overcoming those barriers?
My
second question relates to the crucial 2020 targets—the
demanding objectives that by 2020 we will have made major strides
towards greater energy efficiency across Europe, towards tackling
greenhouse gases and towards renewables making up 20% of all
Europe’s energy. The documents from Europe say that the existing
strategy is inadequate. We need to go further. What further steps
across Europe does the Minister think we now need to take—steps
that I assume the UK Government will urge on colleagues in Europe as a
whole?
Charles
Hendry:
I very much welcome the right hon.
Gentleman’s involvement in this Committee. He brings his unique
expertise and experience, having served as Energy Minister twice in the
last Administration. I am pleased that he can be part of our
discussions.
The
Commission has made more progress on the barriers to liberalisation
than many of us thought was possible even just a few years ago. The
extent to which some of those markets are opening up and the
determination that the Commission is showing in addressing those
barriers, the monopolistic tendencies and the vertical integration
issues that we find elsewhere have been extremely
encouraging.
Independent
regulators and the requirement for much greater clarity about the role
of regulators across Europe, at a nation-state level rather than
through central regulation, are key elements in how the issue will go
forward. However, the powers of those regulators will be enhanced, and
they should be advocating the case for competition and for open markets
in the consumer’s
interests.
The
second example of where we can make progress is with the
interconnectors and the Commission’s insistence on two-way
flows—the flow of gas or electricity cannot simply be one way.
With almost no exceptions, where those interconnectors are in place,
they will have to facilitate two-way flows, significantly enabling
their more constructive and competitive use. That would be an
improvement.
The
right hon. Member for Croydon North asked about the steps towards 2020.
I could not agree with him more. Yesterday, a Commission statement said
that much more needs to be done to address those 2020 targets, in
particular in terms of the roll-out of renewables. Currently, we are
third from bottom in the European Union; we were second from bottom, so
we have moved up one place and are going in the right direction. Our
ambition is to be leaders in renewables technologies, rather than the
people at the bottom of the
pile.
We
are, therefore, keen to look at where we have the greatest
resource—offshore wind, taking forward some of the work of the
previous Administration; further development of onshore wind, where
appropriate; and the development of biomass. This year, we are putting
in place a road map, so people can see who is expected to do what by
when, to make targets much more realistic in terms of how they are
assessed.
An
issue of particular relevance to the right hon. Gentleman is the
all-islands approach, in which we do not look just at how we in the
United Kingdom deal with our domestic challenges, but at where that
resource is more generally available. I know he has taken a particular
interest in the Channel Islands, not just as a tax haven but more
generally as a source of enormous
renewable energy potential. That is also the case in the Irish sea and
elsewhere. We should see how we free up some of those resources and
bring them into the
equation.
Michael
Connarty (Linlithgow and East Falkirk) (Lab):
Will the
Minister comment on what I see as an opening up of the EU attitude to
the need for nuclear energy? I noticed that a statement in one of the
explanatory memorandums sent to the Committee by the EU
mentioned
“the
need to replace existing low-carbon energy sources, particularly
nuclear and hydropower, if the EU is not to lose one-third of its
generation capacity by
2020”.
That
element seemed to be missing from the first energy plan, in which there
were clear indications that some very energy-efficient
countries—such as France, which has low-carbon
nuclear—were having to downgrade. France had to shut some of its
nuclear power to bring in other high-cost technologies, which are still
of questionable
efficiency.
Charles
Hendry:
The hon. Gentleman makes an important point. He
has been a consistent and strong supporter of the nuclear
industry.
The
2020 target remains specifically for renewables. All countries have a
legally binding obligation to move towards a much higher proportion of
renewables. For the United Kingdom, the target is for 15% of all energy
to come from renewable sources, equating to about 30% of
electricity generation. That is a challenging but achievable target,
and we will put in place greater measures to deliver it. Alongside
that, there is greater recognition throughout the EU of the role that
nuclear and new nuclear can play in that
mix.
Most
significant has been the change of approach by the German Government,
who have stopped the early closure of some nuclear plants and allowed
them to work for their full lives. That might present challenges to the
UK. With the possibility of a new-build programme in Germany, some
German companies might be more keen to work there, making it all the
more challenging for us to secure their investment in the United
Kingdom.
Europe
is now, without any doubt, one of the most attractive and interesting
places in the world for new nuclear development. That
presents tremendous opportunities for British companies, such as
Rolls-Royce and some of the major construction companies, to be part of
the
process.
Our
position is that new nuclear should be part of the mix, but built
without subsidy. We are continuing the steps of the previous
Administration in removing some of the barriers, and that is being
looked at carefully elsewhere in
Europe.
Chris
Heaton-Harris:
My first question is about the 2020
renewable energy target. I am also a member of the Public Accounts
Committee, which recently produced a report showing that we are lagging
in respect of our 2020 aim. How are other European countries doing in
achieving their 2020 commitments, which they are all signed up to?
Secondly, will the Minister tell us about the rebanding of the
renewables obligation certificates and the timetable for
that?
Charles
Hendry:
My hon. Friend is correct that the United Kingdom
is lagging behind, which is why we have put in place many measures,
including a road map.
We have introduced a more structured approach to taking forward our
support for renewable technologies in the Department, so that we can be
much clearer about the scale of our ambition and ensure that we have a
collective understanding of how we will achieve
that.
I
understand that Germany, Hungary and Sweden are the three nations that
have met their interim goals on the 2010 targets, but Portugal, Poland
and Lithuania also expect to meet their targets. Those are not simply
voluntary targets; they are legally binding ones, and Governments
throughout the EU are therefore, with great care and urgency, taking
the steps necessary to meet them. Certainly, Britain will see much
greater drive and determination focused on delivering those targets,
rather than the aspirational approach that has historically
existed.
On
the renewables obligation certificates, we have brought forward the
review of the banding by a year. From the investors’
perspective, it is important to have greater clarity at an early stage.
In the spring, we will start the formal consultation—the
informal work has already begun—and we will publish our
conclusions towards the end of the year. The new bandings will still
come into effect in 2013, or 2014 for offshore wind. That will help to
secure investment, to remove the potential hiatus of people not knowing
what will happen when the banding review is completed, and to provide
greater clarity to investors at that early
stage.
Dr
Alan Whitehead (Southampton, Test) (Lab):
The Minister has
mentioned our memorandum of understanding with a number of other
European states on the schedule for the development of an offshore
transmission grid, with a network of North sea and Irish sea subsea
cables. Will the Minister expand on that memorandum? What role will the
UK Government and the Department of Energy and Climate Change play in
the twice-yearly meetings that will address the potential of a North
sea super-grid and how it will work?
Does the
Minister have any thoughts on the regulatory and financial barriers
that will have to be addressed for the transfer of energy between
different energy regimes across Europe as a result of the development
of such a super-grid? Will the present arrangements for point-to-point
landing of North sea wind energy have to be reviewed, given the
development of that grid, which has the potential to transmit power
across a wider European
stage?
Charles
Hendry:
The hon. Gentleman has asked a range of questions,
but they have a common theme. I hope that Britain can be a key player
in that development, not only in the twice-yearly formal discussions,
but in what occurs alongside them. We might spend an enormous time
working on the ultimately perfect super-grid, including on which
connections should be put in place, and never actually get round to
building it.
In addition
to that multilateral work, we should look at the bilateral
relationships that will secure the key interconnectors—for
example, from Denmark to Britain, Norway to Britain, Britain to
Ireland, and potentially Britain to Flamanville in Brittany. We should
look at where the key interconnectors can be and how they can be
further developed, so that investment will come in and take advantage
of the bilateral and commercial interests relevant to making that
happen.
Certainly,
as the system develops into more of a super-grid, which will be
important when we have a network of offshore wind facilities, we will
want to enhance the security of supply by enabling power from different
parts of the North sea to be brought in when the wind is there to
provide it. We will want to have interconnectors so that when there is
too much wind in the system, the power can also be sold to other
countries.
Regulatory
approaches and the standardisation of all the different issues will
become all the more important, and the Commission has an important role
to play. This matter shows international energy co-operation at its
most logical, and I am pleased to see the role that the Commission is
taking forward.
The hon.
Member for Southampton, Test spoke about where the electricity is
brought to shore and whether those sites should be looked at again. I
am pleased that work is going ahead between the national grid and the
Crown Estates to look at that issue more strategically. As I understand
it, the developers often want a point-to-point connection, but that can
put an intolerable burden on both the onshore grid and the costs of
upgrading.
Alongside the
interests of the developer, we need a realistic approach to ensure that
we do things in a strategic way. If we build a link to a relatively
close offshore wind farm, we should look at what may happen beyond it
at that stage, rather than require an entirely new connection to be put
in place in due course. We are taking that work forward with the
national grid, the Crown Estate and Ofgem.
Transmission
issues are primarily led by Ofgem, but there is an understanding on
both sides of the equation. The developers will not build offshore wind
farms if they cannot get the power to market. We must ensure that such
things are done in the most strategic way so that we do not waste
resources.
Huw
Irranca-Davies:
May I ask three questions related to our
renewables capacity, both onshore and offshore? First, in terms of
offshore readiness, will the Minister comment on our preparedness to
move ahead with the final parts of round two and round three? Are there
any obstacles to that? Perhaps he will also comment on what I like to
describe as Labour’s legacy, and on the fact that many of the
measures he described that will enable us to go ahead were already in
place. There is common ground on that. Those measures will achieve a
massive roll-out in offshore wind power.
Related to
that, does the Minister agree on a point that I have been pushing with
Treasury Ministers? It is that this massive expansion of offshore wind
power—particularly with round three—comes on the back of
taxpayers’ money. The Government have helped it to happen with
the ports money that Labour committed to and the Minister has
delivered, and with ROCs and the grandfathering rights that I am sure
will happen with ROCs.
We should not
therefore see an enormous windfall for the Crown Estate and the
sovereign support grant. It is vital to provide protection for the
royal family and the civil list, but in times of austerity it is
equally important to protect the taxpayer’s shilling. Money that
comes back from the massive expansion in offshore renewables should
come through the Crown Estates back to the Exchequer, perhaps for the
Minister to use again in future projects—who knows?
Thirdly,
in the Localism Bill, people are intrigued about how the Minister will
turn away from what his colleague described as a “wasted
decade” of renewables when referring to onshore wind. There are
reforms to the planning structure under the Localism
Bill—perhaps the Minister could give us a megawatt target for
onshore wind power, and tell us how the Bill will deliver it. I am sure
that it will deliver through community gain, but perhaps he can expand
on that and tell us what targets he is aiming at for megawatt capacity
development on onshore wind.
Charles
Hendry:
First, I will deal with the Labour legacy, and
then I will move on to areas where we may find a more common purpose.
To be second from bottom in the whole of Europe was not particularly
the legacy that we wished to inherit on renewables. There was a lot of
aspiration, but there was no delivery plan to make things happen, and
it was a one-club golfer’s approach—it was all onshore
wind. We started to see the emerging element of offshore wind, but we
are now taking forward a more solidly-based programme for delivering
that, and ensuring that we will win jobs for the United
Kingdom.
One
lesson that we learned—from London Array, for example—is
that 90% of the contracts for jobs and investment went to Europe or the
far east. Through the money that we are putting into the ports, for
instance, we are determined to see a renaissance of manufacturing in
those communities, so that they can be major centres not only for
servicing the offshore wind sector, but for manufacturing the turbines,
blades and other aspects.
We are doing
what we said in opposition we wanted to do, which was to give the same
drive for renewables as the last Administration gave to nuclear power.
I am not taking the focus away from nuclear, but saying that it was
actually a very good model. The Office for Nuclear Development and the
nuclear development forum increased Britain’s attractiveness for
new nuclear build; we are now doing the same for renewables,
particularly for offshore
wind.
On
the windfall issue, I think the hon. Gentleman might have been reading
the Daily Mail a little too much, which I usually would not
accuse him of. The money from the Crown Estate goes into the Treasury;
it is not a windfall for the royal
family.
Huw
Irranca-Davies:
What about the sovereign support
grant?
Charles
Hendry:
We are looking at the aspects of dealing with
that. The way forward has to involve active engagement from the Crown
Estate in looking at how developments may happen, facilitating some of
the transmission connections and looking at how it can make those
things come into place most effectively. The role of the Crown Estate
is widely welcomed by the offshore
industry.
On
localism, we are determined to have a new relationship. The leader of
the Labour party, when he was Energy Secretary, said that people who
object to onshore wind farms are like those who drive across pedestrian
crossings without stopping. That did not win people’s hearts and
minds. We now have to find a better
way, through the Localism Bill, of engaging with the communities that
host them. At the moment, a body of opinion strongly supports wind farm
developments and a body of opinion is strongly against them, but a very
large body of opinion does not express a view.
Through
the localisation of business rates, through other benefits directly to
local communities and through more community ownership, but also
allowing greater discretion on planning meetings locally and removing
some of the top-down requirements on them, we can do more to ensure
that there is public
acceptance.
We
believe that onshore wind has further to go. We set out a number of
pathways for 2020 and 2050, so there is a range of options for how that
can be met. More can be achieved on onshore wind, but it has to be done
with greater public acceptance than it has had in the
past.
Mr
David Anderson (Blaydon) (Lab):
The Commission’s
report states that one of the shortcomings is the failure to realise
the potential for developing the EU’s indigenous fossil fuel
reserves. Under the previous Government, there were some discussions
about doing a strategic environment assessment of the possibility of
the underground gasification of coal off the north-east coast. Could
the Minister update us on that? Where are we at with the carbon capture
and storage projects? Clearly, over the past year, if anything, we have
gone backwards on CCS, which seems impossible given where we were
before.
In
the Minister’s comments on the report, he stated
that
“the
UK has some concerns about proposals in relation to European external
relations policy and references to taxation and planning
policy.”
Could
he expand on that? Does he see any stumbling blocks in what the
Commission wants to do? What problems might there be for taxation and
planning policy on this side of the English
channel?
The
Commission also says that it will present an energy efficiency plan in
early 2011, which will be followed by concrete regulating proposals.
Could the Minister explain how those will be taken forward? What effect
will they have? Will we need a referendum to enact them in
Britain?
Charles
Hendry:
The hon. Gentleman’s first question was on
the current status of carbon capture and storage. In the public
spending round, we secured £1 billion for the first project. Far
from going backwards, that is the most that any Government anywhere in
the world has allocated to a single project. There was a great deal of
ambition before, but no funding was allocated to it. So we have taken
that forward. We were always rather critical of the way in which that
first competition was set up. It was too narrowly focused on a
post-combustion technology, and we called for it to be broadened, but
we are stuck with the framework of that competition. The only way that
we could broaden it at this stage would be to scrap it and start again,
which would dismay every one in industry. The works are now going
forward to finalise how the money will be spent and to see whether we
can get what we want out of it, which is 300 MW of retrofit CCS
capacity on the Longannet plant in Scotland. That work is ongoing and
making good progress; it is wholly incorrect to say anything other than
that we have made good progress.
We
have also said that we want to see more section 33 projects. We have
broadened that out to gas. We took the advice of the Committee on
Climate Change in that respect. We are keen to see how we can take that
further in relation to gas in those remaining competitions. In those
competitions, we have spoken to the industry about how it would like to
see them developed. We can therefore frame the process in a way that
takes account of its ambitions, rather than doing things purely
according to our own approach, without taking account of what industry
wants to bid in a specific project. That is a much more constructive
way of doing things. It will take a bit more time to ensure that we do
that, but the next competition should not take the four or five years
that the first one has taken. That has been a source of great
frustration.
Tax
and planning issues are essentially reserved matters. How we tax
different industries and the market reform proposals that we are
considering more generally are within the gift of individual member
states’ Governments. The reforms that we are taking through are
a vital necessity to secure the £200 billion of investment that
we need as a country. However, that gives us the flexibility of
providing a feed-in tariff or contract for difference approach to
nuclear, coal with carbon capture and other forms of carbon capture and
renewables. Such an approach will support a whole range of different
low-carbon technologies in a way that reflects the associated
costs.
Again,
planning is a reserved matter. As the hon. Gentleman will be well
aware, we announced changes to the planning regime with a view to
trying to ensure that it is more localised, that it takes more account
of local opinion and that it gives people the right to get involved
more strongly in the how their communities should be evolving. Such an
approach will bring its own challenges, but it is a more robust way to
deal with the matter. On a unilateral basis, without having to refer
these matters to the European Commission, we can take forward those
changes in the way that we see
fit.
The
hon. Gentleman also asked about energy efficiency plans. Again, we can
carry out the changes being made in the United Kingdom unilaterally.
The green deal is the centrepiece of the changes being made through the
Energy Bill, which will come before this House soon and is currently in
the other place. We are considering a programme for how we can move our
housing stock from being some of the least energy efficient in Europe
to being some of the best. That progress is long overdue, and we are
determined to see it come
through.
Finally,
the hon. Gentleman asked about underground gasification of coal. That
is one of a number of issues that I have asked for more work to be done
on. Coalbed methane and the development of shale gas are further
issues. Unconventional sources are becoming increasingly evident, and
there needs to be greater understanding nationally and internationally
of the potential of those technologies and the risks and challenges
that go with
them.
Andrew
Bridgen (North West Leicestershire) (Con):
Aiming to
obtain the 2020 targets will cost the UK energy consumer a lot of
money. Does the Minister have any figures on what complying with these
targets will cost the UK energy consumer? I detect that tidal power has
become very much the poor relation in renewables. That is of particular
interest to the UK, because we have some of the largest tidal ranges in
the
world. Does the Minister believe that the fact that tidal energy is of
little interest to many of the southern European countries is perhaps
why that technology is not getting the push that it possibly could?
What are we going to do about that?
The Minister
says that we are lagging behind in our renewables compliance. However,
we are leading the way in liberalising and opening up our markets to
energy competition. I certainly detect a reluctance on the part of some
countries to open their markets up to competition. Does he agree with
that and what more can we do to ensure that we have liberalised energy
markets across
Europe?
Charles
Hendry:
My hon. Friend is absolutely right. Britain led
the way globally in liberalising our energy markets, and many others
have chosen to follow. Such an approach has served consumers well. For
many years, it delivered the cheapest electricity and gas prices
anywhere in Europe. Some countries have been rather slower to adopt
that approach, and I am encouraged by the unbundling measures being put
in place in the third package, which will drive forward the
Commission’s ability to address those problems where they
remain. We are seeing a significant shift towards liberalisation, which
is something that we very much
welcome.
My
hon. Friend referred to the cost of different sources of renewables and
meeting the 2020 targets. Given that we have coal plant that is no
longer fit for purpose and needs to close and nuclear plant that is at
the end of its life and a massive need of £200 billion to
replace that infrastructure, if it were left purely to the market, it
would undoubtedly invest in gas because it is cheaper and quicker to
build. That might put at risk our energy security, because we would be
dependent on imported gas for perhaps 70% of our gas needs by 2020.
That brings with it risks of its own, when there are more sustainable
local sources of energy that we should be developing instead. We need a
balanced approach and renewables have an important part within
that.
If
based on oil at $80 a barrel, the costs of our changes would mean an
increase of £1.60 per week in consumers’ bills. When we
start getting oil at $100 a barrel, consumers will actually be better
off under the changes and use more renewables than they would when
relying on oil and gas to the extent that we would otherwise do. There
is a real benefit to the consumer under these changes. The other factor
is that, while the building of a gas plant is relatively cheap, its
running costs are high and quite unpredictable and variable, whereas
for wind turbines, for example, the costs are purely in the
installation and construction, and the end resource is free. So to
protect consumers from massive fluctuations in oil and gas prices,
having a resource that will be free at the point of use is something of
great benefit,
too.
My
hon. Friend asked about tidal matters. My colleague with responsibility
for climate change, the Minister of State, Department of Energy and
Climate Change, my hon. Friend the Member for Bexhill and Battle
(Gregory Barker), held a round-table meeting this week in Exeter to
find out how we can take forward the tidal technologies. We ought to
lead the world—my hon. Friend the Member for North West
Leicestershire is absolutely right—but we have to be realistic
about what they can achieve. We could have a couple of gigawatts of
electricity from
tidal sources by 2020, but the real potential will come as they move to
a mass scale in the 2020s and 2030s, so their contribution is some way
off. However, we should be doing more to develop the nascent
technologies at this stage, which is why we are looking at how we can
create a Silicon valley-type approach, where people who are interested
in developing the technologies will automatically look to Britain as a
location for doing
so.
Malcolm
Wicks:
When the Minister alluded to my interest in the
huge tidal energy potential off Alderney, as a quip he mentioned tax
havens. As Hansard does not do jokes or irony very well, I wish
to put it on record that my interest in Alderney is non-financial.
However, I appreciate the fact that, early in the morning, the Minister
was making a joke. It was not necessarily his best joke, but it was at
least an attempt at
humour.
The
Minister spoke about interconnections. I know from past experience of
five or six winters ago that, when the going gets tough in terms of
energy and perhaps when there is a Russia-Ukraine kind of crisis, the
gas was not flowing towards the UK despite often very high prices for
it. In other words, the market was not working. Given the prevalence of
long-term contracts in nations such as Germany, but our reliance on
shorter term contracts, sometimes buying gas on the spot market, is the
Minister growing in confidence that, if there were difficulties in the
future, the market would work and gas would flow to the United Kingdom
and not just flow from the United Kingdom towards continental
Europe?
The
Minister mentioned the potential of the southern corridor; in other
words, the possibility of getting energy from Turkmenistan through the
Caspian sea and Azerbaijan to Turkey and then to the European Union.
That has been quite a slow train coming—a slow project—so
will he give us more of an up-to-date brief on where he thinks that
enormously important but difficult project is
now?
Charles
Hendry:
I apologise to the right hon. Gentleman for the
slurring of his character. I have enrolled in the Malcolm Wicks summer
school for joke-telling to ensure that the calibre of my jokes will
improve, and I hope that Hansard will have the little word
“laughter” in brackets, which it sometimes puts in so
that anyone reading the debates will realise that what was said was
intended as a joke. I understand the sincerity and earnestness with
which the right hon. Gentleman approaches the energy potential of the
Channel
Islands.
The
right hon. Gentleman is right to raise concerns about interconnectors.
It is for ever written on his heart that a few days after he, as Energy
Minister, said that we were awash with gas, we virtually ran out.
Dealing with those problems was a real challenge in the 2005-06 winter.
The world has moved on dramatically since: the opening of the liquefied
natural gas facilities—a magnificent and important success
story—and the opening of the Langeled pipeline have greatly
enhanced gas security in this country.
However,
there is no scope for complacency, and that is why we are taking powers
in the Energy Bill to provide a greater obligation, with much heavier
penalties, on suppliers to ensure that they can meet demand in extreme
situations. We believe that that will drive them
towards greater investment in storage. I have issued licences for gas
storage capacity that, if constructed, will double capacity in this
country. We are taking that forward, but we also want more long-term
contracts. We also want to see the natural role for Government, when
the contracts will often be long-term with state oil and gas companies.
We want to find the role we can play to bring them to fruition, and we
will be much more engaged in that process.
As for the
situation this winter, we started with an unusually cold December, with
some of the greatest days of gas demand that we have ever seen. The
consequence was that storage ran down more quickly than anticipated.
However, the variation in price since a slightly milder January has
meant that demand has reached a plateau, and we are going into February
with gas storage pretty much in line with recent years. The approaches,
the new routes into market of the pipelines and the LNG mean that when
the price is going up, more will be bought for storage, because there
will be a commercial reason to sell it in due
course.
The
right hon. Gentleman also asked about the southern corridor. As he will
be aware, there are two schemes: the South Stream and the Nabucco
proposals. We would like an additional route to market, and we will
work with the developers of both schemes to see which can come to
fruition. We think it important for energy security more generally in
Europe that we have new routes to market that avoid Ukraine, given the
potential bottleneck that remains in place there. We are seeing a
greater sense of urgency within the Commission towards the support that
it can give in taking forward those measures. We are also seeing real
progress in the construction of the Nord Stream pipeline and the
benefits that that will bring.
We have to
work closely with countries at the other end of the pipeline. I
recognise that Britain is about as far away as possible in Europe from
those sources of gas. During the Russia-Ukraine dispute nearly two
years ago, gas was sucked through Britain as a transit country and,
therefore, we had pressure on our supplies, because of a problem on the
other side of Europe. We need to work with countries such as
Turkmenistan and look at the potential in northern Iraq, to ensure that
there is funding scope in terms of supply security that will enable
those projects to be
built.
Chris
Heaton-Harris:
May I take the Minister back to the
renewables target for 2020? What is the Government’s policy on
very small-scale local supply units that could be introduced by
anaerobic digestion, photovoltaic cells and so on? There is some
concern over the future of feed-in tariffs—I believe that they
will be reviewed later this year—which incentivise such
developments. Such renewables work all the time, whereas anybody living
near a large wind turbine over the coldest month of last year would
have seen that it was not turning at all and therefore not helping the
country in its hour of
need.
Charles
Hendry:
I am grateful to my hon. Friend. Most renewable
technologies will be intermittent. Solar power will also depend on the
intensity and availability of the sun, in the same way that wind
turbines depend on the availability of wind. With all these
technologies, there will be a degree of variation and fluctuation. We
have confirmed that we are taking feed-in tariffs forward.
We have been concerned that a change has emerged since the last
Government developed the scheme—large solar farms, which could
not have been envisaged at the time. We have expressed concern that
feed-in tariffs were not intended to be used to convert farms, which
could produce crops, into large solar farms. That is an issue
particularly in the south-west, but we are seeing developments in other
parts of the country as well. We are considering how best to promote
genuine microgeneration to encourage a change in consumer behaviour, so
that people can see how they can be part of the
solution.
We
will also dramatically raise the ambition on anaerobic digestion. We
think that biogas, which can either be used at source to create
electricity or in people’s homes for heating, or be put into the
grid, offers much greater potential than has been realised so far. As
part of that process, we are looking at how to have a much more
joined-up approach to waste management overall and not just having
penalties for landfill. It is absurd that so much food still goes to
the landfill when it could be used in anaerobic digestion units to
create biogas. We will consider how we can create a much more cohesive
approach across that
landscape.
Dr
Whitehead:
Will the Minister expand a little on the
question of electricity interconnectors? To what extent might a
European supergrid be presaged, as he indicates, by bilateral
arrangements to extend interconnectors on to a wider platform? In that
context, does he consider that the extension of interconnectors,
particularly to places such as Norway, may have a substantial role to
play in electricity storage? Will he expand on the considerations for
electricity storage in the UK, possibly through the use of
interconnectors elsewhere in Europe? In doing so, will he reflect on
the extent to which it may be necessary to ensure that capacity is
available on a reserve basis across Europe as interconnectors increase?
That would avoid the possible result that a number of European states
may consider that someone else has capacity on their interconnector,
which can therefore come to the rescue of one’s own lack of
marginal capacity, and that no one then has the marginal capacity to
deal with the concerns of other countries. Does he think that the
discussion on the European supergrid will encompass such
considerations?
Charles
Hendry:
The hon. Gentleman touches on two critical
aspects—first, the need for vision. I think that he and I share
the overall vision, looking at how one can bring to bear greater
resource from the North sea in the European market in the north, while
harnessing the solar potential in north Africa and around
the Mediterranean to bring it into the southern part of the grid, and
see how those can be developed. Alongside that, we have to know the
hard-headed reality and not use the supergrid to cut corners and
jeopardise energy security in the process.
A great deal
can be done on the bilateral arrangements. I am interested in seeing
how we can take forward the issue raised by the hon. Gentleman on
storage—in Norway, for example. The Norwegians are the largest
potential developers offshore. There is 9 GW of potential power at
Dogger bank. When that is too much to be absorbed into a system, could
it be taken to Norway and used in its system or for pumped storage
there,
allowing us to bring back, through the same interconnector, clean
hydropower electricity when we have pressures elsewhere in the system?
The issue under discussion is not whether that should happen—we
are keen to see it go forward, as are the Norwegians—but whether
it is best to have a straight point-to-point connection between Norway
and Britain or to divert via one of the major offshore wind farms, and
what the technology challenges alongside are. In those respects, we are
making good progress. That will help us to deal with the greatest
challenge of all on renewables, which is ensuring that the electricity
is there when consumers need it, rather than when the wind happens to
blow. The development of other ways of storage—battery
technology, hydrogen and even hot water—offers many different
ways to deal with that challenge.
The hon.
Gentleman is right that we need to look at the capacity across Europe
more generally. We therefore need to have the strategic group looking
at the precise implications and ensure that we are not seen as using
the proposals as a shortcut. My own view is that it is a way to deliver
much greater security for consumers. There is, for example, great scope
for offshore wind in the Irish sea, which could never be justified for
development for the Irish market. There is the potential for 5 GW of
tidal power in Alderney, with an amount not dissimilar to that in
Guernsey. Those are trapped resources. The connectors offer us the
opportunity to release those resources and to start to see how the
wider resources can meet the wider demand and challenges, and move
beyond the nation-state
approach.
Michael
Connarty:
The earlier question about wind and tidal power
was interesting, given that the Government are abandoning the Severn
barrage proposal, for which there was great hope. In Scotland, the
Executive are increasing the capacity for tidal and wave power, and are
working with Taiwan, which is very interested in importing the
technology from Scotland and selling tidal generating capacity to
Portugal. It seems that the vision in Scotland is not followed by the
Government down
here.
There
is a problem with this—the Minister talks about it, and I am
sure the European Council talks about it—in terms of safety,
security and climate change. In document 16096/10, which is document
32170 for those who want to look at this from outside this Committee,
it is clear that the Commission has increased its estimate for what
this will cost. It is now saying that €1 trillion will be
required by 2020. In paragraph 10 it says something that our consumers
all know. It says
that
“that
infrastructure investment will continue to be financed mainly from
tariffs paid by
users”,
which
touches on the question asked by a Government Member earlier.
The question
is whether we can afford it. The consumers I meet say, “Why are
prices so high when the barrel price is only $80, when it was over $120
before and prices were much lower?” It is clear that the
commercial model is front-loading the costs on to the consumer tariffs
to pay for future investments. The document also states that that will
not be adequate. In the next financial perspective, the European
Commission estimates that it will have to raise money from the European
budget to pay for investment. While this talk is going on, who is
considering the plight of the consumer, who is being
hammered by a domestic market, which we say is competitive, but has only
six suppliers? That is imperfect competition. It is not a competitive
market at all; it is a quasi cartel. What protection do the Government
intend to argue for, for the consumer in all these grand plans for
renewable
energy?
The
Chair:
Order. To allow time for the Minister to reply and
for further questions, under the provisions of Standing Order No.
119(9), I am extending question time to allow the remaining answers and
questions to be dealt with. We shall move on to the debate after no
more than half an hour. Any extra time given for questions will be
deducted from the total time for debate, so we will still finish no
later than 11.25
am.
Charles
Hendry:
Thank you, Mr Hollobone. I will try to respond
fully, but not excessively, to allow as many colleagues as possible
take part. On the Scottish aspect, we have a clear respect agenda with
the Scottish Executive. There are parts of this policy that are
retained and there are parts where decision making is devolved. We want
to do that in the most constructive way possible. There are many areas,
such as the development of the offshore oil and gas industry and the
offshore wind potential, where we work closely with the Scottish
Executive. It is a harmonious relationship, rather than a competitive
relationship.
The
hon. Gentleman is absolutely right to draw attention to the cost to
consumers. Part of the challenge that we face is that so much of our
energy infrastructure is clapped out. We have not seen enough
investment over the years to replace it with a sufficient variety. That
is why we face this cliff edge in 2015, when a third of our coal plants
close, because of the large combustion plants directive. Towards the
end of the decade, the industrial emissions directive closes much more
of it. Our nuclear fleet is physically at the end of its lifetime. The
fuel is no longer available, so there is a finite time by which it has
to stop. We must secure new investment, so that, when we have to
rebuild the fleet, we have the opportunity to do it in a low-carbon
way. There will be costs for consumers involved in that, and that is
also why we are putting so much emphasis on such things as the faster
roll-out of smart metering, which gives consumers more control over
tariffs and energy efficiency in order to reduce unit
consumption.
Much
of that comes back down to the price of oil. If the price of oil
remains where it is today—around $100 a
barrel—under the changes that we are making, the consumer will
be better off. If the price starts increasing to $110 a barrel,
consumers will find a significant gain. That requires us to look even
more assiduously at some of the low-carbon technologies that are
available. The market would not bring in enough entrants to secure that
investment on its own. There are two issues with that. The first is the
funding, for which I think that financing is available, because there
are many international investment funds and pension funds around the
world that have not yet looked at the UK energy market and would find
it attractive to do so. Attracting that investment is part of our
responsibility.
The
second and greater issue is with the capacity to build. We cannot
deliver everything that is necessary with the main six players in the
market. We have to
bring in new entrants. Those will often be international companies,
which will be competing for resources, but that will help to create a
competitive market that will be good for consumers in the longer term.
I absolutely agree with the hon. Gentleman that the interests of
consumers have to be at the forefront of our minds. We would not have
wanted to begin with the massive rebuilding challenge that is
necessary, but we will do that in a way that delivers long-term
security of supply for consumers and that also addresses long-term
affordability issues as best we
can.
Huw
Irranca-Davies:
I have one short question. In the
explanatory memorandum of 24 November 2010, I noticed that the Minister
alluded to some concerns over where the EU extends its remit
and—the classic concern of UK Ministers—how far that
trespasses on our own ability to define our own agenda, not least on
taxation, planning policy and avoiding putting undue burdens on
industry and the consumer. Will the Minister expand on those concerns?
As the action points flow forward from this document, it is important
to know where the Minister will be arguing that we will develop
policy—particularly on planning and taxation—and where he
will say that there is a common good to be served across the EU as an
energy
entity.
Charles
Hendry:
The hon. Gentleman is right that there is a fine
balance that needs to be struck. Energy is essentially a retained
power, but we recognise that we live in an interdependent world and
there are good reasons, such as our own security of energy supply, why
we should work together. Some issues are clearly international. This
year, the focus on gas and electricity interconnections—east to
west and north to south—that we will see from the Hungarian and
Polish presidencies will show the extent to which the EU can help to
address some of those
barriers.
The
EU is taking a useful position in some of the international
negotiations. The satisfactory resolution of last year’s
difficulties between Poland and Russia was greatly helped by the
EU’s involvement, which added an international aspect and made
it clear that there were EU rules that Poland is now bound by. There
are important areas where we see greater scope for international
co-operation, and we see a strong role for the Commission in opening up
markets to competition more
effectively.
Power
is, however, clearly retained in our ability to decide how we should
meet the targets, what the balance between different technologies
should be, what the role of nuclear should be, what the approach to
carbon capture and storage should be and what the new technologies that
we want to focus on are. All of those remain nation state-led
decisions, but I am particularly pleased that the Heads of Government
are looking at energy this week as part of their process. This is the
first time that that has happened, and it should be welcomed. The
security issues are clearly international, but the resolutions to some
challenges are clearly
domestic.
Andrew
Bridgen:
I applaud the Minister’s appreciation of
the problem. There is no doubt that being at the end of a pipeline with
almost no gas storage is the reason why we have the most volatile gas
prices in Europe. I applaud his efforts to address that
problem.
I
also liked his words about possible collaboration with our old allies,
the Norwegians, who undoubtedly have huge capacity for pumped-water
hydroelectric storage. It would be fantastic if we could get that
system working to deliver energy back and to use energy when we are not
using it. Will the Minister tell us whether EU directives place any
restrictions on the countries with which we could negotiate energy
contracts in future? As he will know, Norway is not in the
EU.
Charles
Hendry:
My hon. Friend is right that Norway is not in the
EU, but it is largely bound by the directives and regulations that come
through the EU.
One of the
changes under the measure will be that supplier companies will not be
allowed to own the interconnectors. Such a change will create
challenges, because although sometimes the generators will be keen to
own the connection, it must be owned by a third party. That will
require some differences in the structure of the strategy going
forward, which is not insuperable. The measure provides consumers with
greater protection from fragmentation of the market and it removes some
element of potential vertical integration.
We are free
to carry out a great deal of this work on a unilateral-bilateral basis.
Some of the work on the all-islands approach will be through the
British-Irish Council, which brings together this set of islands to
examine the collective challenges that we face. We do not have to work
on such matters through the EU, but we will clearly be working within
the spirit of its regulations. Our approach has its blessing and strong
support, so we think that it has struck the right
balance.
Michael
Connarty:
I have a final question for the Minister. One of
the great disappointments is that the EU emissions trading scheme, both
in its original and in its present form, has been subject to serious
fraud, which undermines the market. When I have spoken to companies
about investment possibilities in the market, they have wanted a fixed
idea of the carbon price. We had hoped that the EU ETS would be part of
that mechanism. If we have an EU ETS, how can we ensure that it is fail
safe and not subject to fraud, so that companies can get an idea of the
real
price?
Charles
Hendry:
The hon. Gentleman makes an important
point.
May I correct
an earlier response on fuel poverty and consumer costs, Mr Hollobone?
We think that the increase in cost of bills will be £160 a year
by 2020, which is £30, or 4%, lower than it would be without the
market reform that we are introducing. I think that I had suggested a
somewhat lower
figure.
The
hon. Gentleman is right about the failings of the EU ETS scheme. The
fraud that has recently come to light is a new challenge, which must be
addressed through the formal legal processes. It is critical to do so
quickly to restore confidence in that
market.
The
hon. Gentleman alludes to the wider issue of the lack of robustness in
the EU ETS to enable people to make investment decisions. That is why
we have also been consulting on the carbon price in a process that has
been led by the Treasury. By putting in place a carbon floor
price—a carbon tax, essentially—people will be much
clearer about what the carbon price will be by 2020. People who are
investing in low-carbon
technologies, many of which will not be built for a long time, need a
greater understanding of what the price will be.
We
would much prefer to deal with such matters on a multilateral
basis—even beyond the EU—as a global movement towards
carbon pricing. In the absence of such a movement, however, we must act
on a unilateral level to secure the necessary
investment.
The
Chair:
If no more Members wish to ask questions, we will
proceed to the debate on the motion.
Motion
made, and Question proposed,
That the
Committee takes note of European Union Document No. 16096/10, relating
to a Commission Communication on Energy 2020: A strategy for
competitive, sustainable and secure energy; and agrees that the
Commission’s Energy 2020 strategy is an important step towards
defining the EU’s energy policy over the coming decade and will
underpin Europe’s move to an energy-secure, low-carbon
competitive economy.—(Charles
Hendry.)
10.4
am
Huw
Irranca-Davies:
Our illuminating series of questions and
answers demonstrated that there is a broad consensus across the parties
on where we should head as a European Union and how to get the benefits
of good collaboration on a number of fronts.
The Committee
will know that I am normally a very affable gentleman, but I have been
provoked to correct some of the Minister’s assertions about the
roll-out of offshore renewables. As he knows, the licensing regime, the
granting of licences, the designation of areas for offshore
wind—and the underpinning renewables obligation certificates
that allow that to happen—and the port competition were all
Labour policies. They were in place before this Government came in and
they would have been delivered by a Labour Government. Will the
Minister tell us what new measures the coalition Government have added?
I am glad that he has taken the policy forward, but it seems a little
begrudging not to acknowledge that the foundations were laid firmly
before his Government came to
office.
I
would like to hear the Minister’s comments about the sovereign
support grant. I know that it is predominantly the responsibility of
Treasury Ministers, but my concern, as a shadow DECC Minister, is to
protect the heavy investment that the Labour Government made, and the
coalition Government are continuing to make, in offshore wind. As he
will no doubt be aware—he can go away and check this—a
change made in the small print of the comprehensive spending review
means that the civil list will no longer appear before Parliament for
affirmation. It will now be based on a percentage of income from the
Crown Estates, and that percentage of income will go to the sovereign
support grant and pass to the recipients of the civil list—it is
as straightforward as that. Do the Minister and his Treasury colleagues
agree that that amount should be capped so that the receipts from the
massive expansion in offshore wind, which was funded from
taxpayers’ money, go back to the taxpayer via the Treasury and
the Crown
Estates?
There
has been some focus on consumers, and the front of the 2020 document
notes
that
“The
internal energy market is still fragmented and has not achieved its
potential for transparency, accessibility and choice. Companies have
grown beyond national borders, but their development is still hampered
by a host of different national rules and practices.”
To pick up the point
raised by the hon. Member for North West Leicestershire, the document
states that there
is
“sub-optimal
consumer choice. Implementation of internal market legislation is
disappointing, with over 40 infringement procedures underway on the
second internal energy market package from 2003
alone.”
That
is a real concern, because one of the things on which we must
focus—not only as the UK, but as a European Union
entity—is delivering for consumers and UK business. What will
the Minister argue for strongly in that respect when he takes the
strategy forward and actions flow from the
document?
On
the smart grid and the initial demands that will be placed on it by
renewables, the report
states:
“The
security of internal energy supplies is undermined by delays in
investments and technological
progress”,
including
the development of the smart grid. I know that the Minister is keen to
see smart grid development, which has to be carried out from end to
end. I am interested in his thoughts about whether we should take a
strong lead in the UK and then roll out our best ideas and best
practice.
Carbon
capture and storage, which my hon. Friend the hon. Member for Blaydon
mentioned a moment ago, is also important to energy security in the UK
and internationally. I understand from the Minister that it is likely
that there will be announcements on both the funding and the
accelerated timetable by the summer, after lessons have been learned
from the first CCS demonstration project. Will he confirm that? It is
important that those lessons are learned and then applied them to pre
and post-combustion gas and coal to achieve a mix of energy through
2020 and beyond. If we learn the lessons from the first project and
accelerate the time scale, I would hope that the second, third and
fourth demonstration projects would be implementable at the same time
as the first.
May I turn
back to how the proposals on energy tie in with the Localism Bill? This
is a genuine concern. The Minister was not dismissive of my concerns
earlier about onshore wind, but he slightly made light of them. We know
of the difficulties in the past decade in trying to roll out onshore
wind generation. The Welsh Assembly Government, recognising that there
is often strong local opposition to such generation, have taken a
different approach. They have driven it through on publicly owned
forestry estates, but that may soon not be an option in England because
of the Public Bodies
Bill.
However, it
is not only onshore wind that is a problem—it is also anaerobic
digestion and photovoltaics on farms. I believe the Minister and I
agree on this—he might be willing to confirm that. I really do
not like the idea of the feed-in tariffs scheme for photovoltaics,
which was established under Labour, being abused. It has not been
abused too much yet, but there is potential for that through the
development of photovoltaics on greenfield sites, on arable land and on
crop land. We can avoid that. I know that the Country Land and Business
Association and others are keen on the idea of using farmers’
barns, brownfield sites and so on, but, in order to do that, we have to
look at how the planning system
works. There is the potential for anaerobic digestion, PV for farms,
community generation schemes and so on to be bogged down by the
Localism Bill—not to be helped by positive localism but held
back by negative localism: “We want this as part of our energy
security, but we don’t want it
here.”
I
am interested in trying to tease out the DECC perspective—the
Minister is a DECC Minister—as opposed to the perspective of the
Department for Communities and Local Government, on how we will make
these things happen. Surely it is in the interests of our consumers to
have the maximum opportunity to get community gain in a way that we
have not achieved up till now—not just the pilot schemes in one
area and another but on a much bigger UK-wide or, in the case of this
Minister, England-wide, scale so that real benefits can be delivered.
Perhaps the Localism Bill does not quite have a handle on that yet, but
we have to get a grip on
it.
The
report also refers to tight future oil supply. Does the Minister agree
strongly with the Opposition that we need to accelerate our ability to
wean ourselves off our dependency on oil? How is he taking forward
Labour’s ambitious plans to decarbonise electricity, and to move
towards electric vehicles? Are we still on schedule? Is he confident
that we can deliver on that? So much depends on what we do broadly in
both the EU and the UK in terms of our energy mix, so can he give
reassurance on that? What more can he do to build on Labour’s
support for and development of biofuels and biodiesel? I know that he
and the Department for Environment, Food and Rural Affairs are
reviewing all the issues concerning sustainability, but will we be able
to deliver on that in a substantial way, and on a good time scale as
well?
On
gas storage, which has been mentioned by a couple of members of the
Committee, we know that many of those who are interested in providing
green energy jobs—let us call them that for a moment—and
gas storage are waiting to go ahead, but they say that the market is
not right to do it at present. Could the Minister expand on what in the
Energy Bill will ensure that that does happen, so that we fulfil not
only Labour’s legacy of delivering the liquefied natural gas
terminals, the pipelines and the associated security, but also create
sufficient storage? My Government had not finished that job when we
left, but it is now a job for the Minister. What in the Energy Bill
will actually deliver the expansion of gas storage, so that we are not
left next winter or the winter after with worries about it
?
The
report also referred to shale gas, which truly has great potential
throughout the EU. If we look at how it is being used in many parts of
America, Australia and Canada, there have been no problems in most
cases. Extraction has been done well, and safeguards have been in
place. Even where safeguards were not in place, the companies involved
operated
responsibly.
I
applaud the Minister for meeting me before Christmas for an initial
meeting to discuss the matter. He will know, as I do, that there have
been a few—it is a few—notorious examples of
environmental despoliation through shale gas extraction. It may be that
that was poor practice by a few poor companies. My worry, however, is
that we may inadvertently introduce poor practice into this
country—or Poland, or elsewhere in the EU—and then learn
lessons that we should have learnt already through international
experience.
The Minister
knows that I have called, on a cautionary basis, for a temporary halt
to shale gas exploration and coal bed methane—they both use the
process of hydraulic fracturing—until we see the outcome of the
Energy and Climate Change Committee’s inquiry. The Committee,
which is chaired admirably by the hon. Member for South Suffolk (Mr
Yeo), will report in three or four months. I understand that the
Minister disagrees with me but, on that basis, can he give the
assurance that he is speaking—as we discussed in a previous
meeting—with Department for Communities and Local Government
Ministers on planning, and whether local government is fully aware and
capable of responding to applications for shale gas drilling and the
extraction of coal bed methane? Are the Environment Agency and the
Health and Safety Executive fully aware, and are they talking to each
other? Are DEFRA Ministers up to speed?
I hope that
there is cross-Government thinking because for this country and the EU,
even with the technical and geological difficulties involved, this may
be another source of secure, affordable gas supplies for the EU and
possibly for export as well—as the US is now doing. However, we
must ensure that that is not at the cost of environmental safeguards,
and that it does not pose a danger to local communities. I think that
we have the strongest safeguards of any country worldwide—and I
say that as a former DEFRA Minister. I am not convinced, however, that
we have had the cross-Government thinking about what is a very new
technology for this country. I am interested in the Minister’s
response; I know that, like me, he is concerned about getting this
right. We do not want to turn off the opportunity and potential; we
only want to make sure that it is done correctly.
Turning to
the 2020 document, I was intrigued because it has been described by
some as the Europeanisation of energy. I am sure that the Minister was
comfortable with that, but has he run it past the 1922 Committee to
ensure that it passes muster for ideological purity and
fitness?
On a point
that was raised earlier by the hon. Member for North West
Leicestershire, has the Minister made an assessment on future energy
costs in the UK, based on what we have seen here in the European
documents and the progress that the UK is making? I am referring to the
costs not only for individual consumers, but for UK plc. It is
important that we look at how we communicate this—because real
choices are being made here, and there is broad cross-party support for
them—as well as thinking about what energy prices will look like
in 10 years compared with those in France or Germany. Purely from a
UK-centric view, will this be a competitive place to do business, in
terms of energy affordability? Particularly, that relates to
high-intensive energy uses, but it is also a matter for small
businesses.
One of the
document’s stand-out themes is summed up in one particular
sentence:
“In
international energy affairs, the EU could be much stronger and
effective if it took charge of its common interest and
ambition.”
I
repeat: if it “took charge”. The Minister has just
signalled, and as a former DEFRA Minister myself I, too, am aware, that
there are many areas in which the EU can enable us collectively to
punch well above our weight as an individual nation. That is absolutely
right, but does the Minister agree that we have to be careful to
maintain the UK’s ability, as an individual entity, to argue
strongly not only on bilateral issues, but in its
own interest, as well as when it is part of the EU entity? I was taken
aback by the phraseology, which seems to have bypassed parliamentarians
and everybody else: that it “takes charge of”. We still
have a role to play, and I am sure that the Minister agrees.
The document
refers to
“the need to
rebalance energy actions in favour of a demand-driven policy,
empowering consumers, decoupling economic growth from
energy”.
It is hard to disagree.
It also talks about the use of the ETS scheme, and developing market
conditions that stimulate higher-energy savings and more low-carbon
investments. Will the Minister tell us how the EU role here helps or
hinders UK policy?
We are very advanced in
our policy thinking on energy mix and how we incentivise it, and on
what market mechanisms are needed and so on. I remind the Minister that
that is not least due to work that was done on FITs, ROCs and so on,
which the coalition is now picking up. Where does he see the EU
assisting in that? Is he aware of potential danger signals to suggest
that EU competence might hinder the Minister from innovating in
consultation with his colleagues?
The document
focuses on two big areas in which we could have real wins on energy
efficiency: one is transport and the other is buildings. I am tempted
to ask whether the Minister will be visiting No. 10; perhaps he or his
colleagues could go as senior green deal advisers and assessors. He
will know that No. 10 has one of the worst energy efficiency
assessments, which was also true under the Labour Government. It is a
classic old building; it has stone walls and a mismatch of relatively
inefficient heating systems, so it is a very difficult building to make
energy efficient. Curiously, with its solid stone walls, it is not
unlike a lot of homes across the country. They are the difficult ones
to make energy
efficient.
The
document rightly points out that, as we have agreed across the Dispatch
Box, if we get the energy efficiency side right, we could reduce some
of the need to build additional generating capacity, here and
throughout Europe, and the need for additional unnecessary investment
in grid and so on. Will the green deal proposals, which are going
through the Lords, deliver? That is not simply a matter for people like
me, who will walk down to B&Q, or ring the utility company to say,
“I’d like to do everything to save a few pounds on my
house. What else can I do in addition to my solar PV panels and brown
water system? I’d like to spend a bit of money”, but for
others. Are the Minister and his colleagues confident that the UK will
deliver the energy efficiency targets for homes? Stone-walled homes,
terraces, private rented homes and so on—the hard-to-reach
homes—are the most challenging, as we, as a Government, found. I
know that the Government have given a lot of thought to this, but many
organisations, including Age UK, are concerned that the proposals will
not reach such households, but will reach the more low-hanging fruit.
Would the Minister like to comment on that, because it is of critical
importance? The document mentions identifying common standards and
approaches, and I know that the Government are very set on the green
deal, so I would like to know how it will work.
I have
touched on the impact on UK planning and taxation strategy. On
transport, which is the other large area on which the document focuses,
does the Minister recognise the importance of a proper joined-up,
GB-wide
decarbonised energy strategy? I note that the Minister is nodding. There
have been bold pronouncements on rail electrification, which is part of
this, and the document signals the importance of these multimodal
points moving towards decarbonised energy. Will the Minister give his
support, and will he speak to his colleagues not only about the
announcements that have already been made, but about the long delay on
rail electrification on the Great Western line to south-west Wales? We
are still waiting for an announcement on that. Not only does it deliver
green jobs and capital, it also helps us with our carbon
targets.
Green jobs
run through the document, and we all welcome that. It also refers to
the development of smart cities, but we need to look at smart
communities as well. What more can we do to drive forward harder on
community-scale energy efficiency and generation schemes for community
gain? That includes combined heat and power, as well as FITs and the
forthcoming renewable heat incentive. We could be in danger of missing
a trick. What the previous Government put in place only went so far,
and the big trick we are missing now is the genuine ability to engage
communities on a community scale. We want to drive that home hard, so
that we do not reach a situation where we have only the big six and
similar companies delivering traditional forms of energy. We need to
localise and decentralise in order to achieve those community gains.
How does the document assist with that and drive it forward in UK
policy?
My
final point concerns the burdens. Certain matters in the document
constitute amber lights, if not red ones, regarding competency. The
standardisation involved in the harmonisation of energy management
schemes across the EU, and in the audits, plans and energy managers,
reminds me of phraseology that I encountered in DEFRA—I am sure
that the Minister’s colleagues now face the same
conundrum—where there was a constant slow nudge towards the
gradual transfer of competencies and the addition of burdens. We must
ensure that all the areas in the document are applied with a light
touch. We must preserve the competencies and our freedom to innovate,
and we must not over-complicate it with EU-wide compliance measures on
which we are already doing well. Perhaps the Minister’s argument
should go in the other direction, and he should say, “Actually,
we are slightly ahead of the game; why don’t you do what we are
doing?”
I am sure
that my colleagues want to raise many other pertinent questions about
the document. I wish the Minister well in his forthcoming discussions,
and in those with the Heads of Government on Friday. There is much
common ground on the matter, but we need to ensure that it works not
only for the EU but for the UK, and for
consumers.
10.26
am
Michael
Connarty:
First, I pay tribute to the Minister. Everyone
who has been interested in the energy debate for the past decade
recognises that during his time in opposition the Minister was
open-minded, discursive, pragmatic and eventually persuadable. That was
most important, because some people had taken hard lines on energy
mixes, on the role of the euro and, particularly in the Labour party,
on the role of the market. I am not
particularly fond of markets when they do not work, and I have commented
repeatedly on the imperfect competition model that was the work of
Professor Joan Robinson, whom I read when I studied economics at
university. The quasi-cartel of six companies who follow each other in
the domestic market, a few weeks or a few months apart but always
heading in the same direction, is a perfect example of that
theory.
The questions
that we intended to ask and the debate that we hoped to initiate by
sending the document to the European Scrutiny Committee have been fully
realised. I compliment the Minister and the Committee, because it is a
big issue for those who look to the Government, and to Governments
across Europe and across the world, to accept that the use of
high-carbon energy sources has had a massive impact on the climate. My
son, for example, lives in Brisbane; many of his friends suffered the
tremendous floods recently and they are not looking forward to the
typhoon that is about to hit Queensland. I believe that much of the
freakish weather that we have experienced recently is not a cyclical
matter but the long-term impact of the continual abuse of high-carbon
energy sources.
In the
market, it is clear that the original European energy package took that
challenge up and came forward with a strategy. It is still early days
to see whether that strategy will work. In the document, we have to
accept that a strategy is needed. We have crossed the Rubicon and moved
beyond the point where people thought that it could be done Government
by Government, or by the market, and we need some agreement about how
to proceed. It also needs vision. By its very nature, the European
Union compromises to get things through Council, and sometimes the
vision is lost. There is an ongoing debate in the document about
whether this matter should be dealt with entirely by the Council, or
whether it should involve shared decision making with the European
Parliament. Clearly, it could be done by the Council and Commission.
Perhaps the Minister will mention the Government position, as we have
not really touched on that procedural matter. Often, the European
Parliament has shown more vision than the natural compromising nature
of the Council to get the least offensive, most collegiate decision
through.
Something
going on in the UK disturbs me. They say that in the land of the blind,
the one-eyed man is king. We certainly have a one-eyed man in the First
Minister of Scotland. On the one hand, the Scottish National party is
visionary in its use of new, low-carbon technologies—I think
that over 2GW have already been delivered, and it is heading for 4GW.
There have been important developments in tidal and wave power in the
north of Scotland. The contradiction, unfortunately, is that when that
party is in power in local government, it often votes against a
planning application for an onshore wind farm, even to the dismay of
the local community.
However, the
SNP has a vision about the use of wind and wave power that should be
taken up by everyone. We are an island; we are surrounded by tidal
forces and we have tremendous estuaries that should be used.
Nevertheless, the Severn barrage has been abandoned—I do not
understand that. The one-eyed nature of the First Minister means that
he and his party are entirely against the use of nuclear power,
although they did extend the use of nuclear power stations in
Scotland
beyond their original life. Hopefully, the SNP can be persuaded that
nuclear power is part of the mix. We need a strategy, but there are
massive contradictions.
Andrew
Bridgen:
Does the hon. Gentleman agree that one great
advantage wave power has over wind power is that tides are predictable
whereas the wind is not? That is a great
advantage.
Michael
Connarty:
Indeed. Those who want to abandon the idea of
wind power—which I do not think is correct—point out that
the turbines are working 30% of the time, but 70% of the time they are
not turning. In the recent great freeze they stopped solidly and were
immovable. They did not contribute at all, which was sad.
There are
problems with the technology, but tidal power has a tremendous
attraction. In Taiwan, I heard the Government talk about working with
the Scottish Government on developing the same technology around the
coast of that island. That was a sensible idea that I hope will be
looked at again by the market, companies and the Government.
There are
tremendous contradictions between the need for things such as security
of supply, infrastructure rebuild—we have also talked about new
infrastructure—and taking up the climate change challenge. The
affordability of such things and their consequences must be accepted by
the Government, as well as by individuals. It is expensive to move from
the cheapest reality—coal—which has a high-carbon impact,
to renewable sources.
There is a
sort of blindness. I think that renewable energy should include nuclear
energy with reprocessing. Look at the developments of reprocessed fuel.
I ask people this question again and again: how much of a fuel rod can
be reprocessed and reused? They are surprised to find that it is 96%.
At first use, only 3% of the fissile material is used up, and 1% goes
on the sheath for the rod. Therefore, we can reprocess it by using
uranium oxide and plutonium oxide to make mixed-oxide fuel. It can be
put back into pellets and fuel rods, and sent back to be
reused.
I know we
seemed to walk away from that during our time in government, because of
the cost, but, in reality, if we want a low-carbon source of renewable
fuel, then, clearly, it is nuclear with mixed-oxide fuels and
reprocessing. I hope that one day Europe will come to realise that and
not have the silly situation in which it says to France, which has a
very low-carbon footprint—much lower than the people who talk
themselves up as being low-carbon economies, such as Sweden and
Denmark—that it should have less nuclear in its mix and more
expensive wind generation, for example, which is illogical. France has
tremendous hydro on every available river and tremendous nuclear. It is
a model that we should be looking at very
seriously.
I
shall now turn to the question of the affordability of the strategy. I
have done some seminars on this for people in the City, and they say
that they are keen on it. They know that there is a thirst for
investment, but when will they have a carbon price to work on? People
working on an investment want to know their rate of return. It cannot
be volatile—although it can be undermined by fraudulent
behaviour or bad practice in, for example, giving out far too many
carbon credits to incentivise people to join the EU ETS—because
the market needs to be able to work with it if it is to provide
finance.
So that is a
big problem, but it is also a problem for Governments. Governments
either have to invest directly in infrastructure renewal or contribute
in some way in the next perspective to the €1 trillion cost that
the European Commission has identified. It will not all be taken up by
the market. We have to realise, therefore, that we have a
responsibility. When we talk about our failure to get a supply during
times of crisis and why the market did not work, the market did not
work because the Governments on mainland Europe entered long-term
contracts with their suppliers. The document states that there is a
virtual monopoly, but they support the consumers in a way that we have
abandoned. Sadly, as a Labour Government, we abandoned that practice
when we got rid of price fixing and switched to Ofgem. That is why we
used the spot market, because Governments had secured supplies for
their populations. That is the purpose of Government; it is not to
increase to market, but to allow both the market and the consumer to
win. Sadly, we do not do that in this
country.
We
either have to raise money and pay it into the EU or contribute in some
other way. For the consumers, it is not just the oil costs. That is a
myth. VAT has not helped, because VAT has gone up on items that hit the
consumer domestically and affect people who use transport. Some 11p has
been added to the price of petrol just from VAT, which is
ridiculous.
It
is not just infrastructure costs. Yes, we do have infrastructure costs,
and, if we get a carbon price, there will be investment and we will get
the renewables we want. We are dealing with these companies’
massive profit increases. They are not just about making the consumer
pay for long-term investment in infrastructure, they are taking
unnecessary sums in remuneration and in profits, and we allow them to
do
it.
This
strategy only comes together if we accept that we have to regulate
pricing as well as incentivising investment. If we do not do that, the
consumer will be made to pay and the politicians will condemn people to
pricing themselves out of the market with fuel poverty becoming
endemic. If the result of the market is the same on the mainland as it
is here, the people of Europe will be short-changed by the
strategy.
10.38
am
Malcolm
Wicks:
I will not follow the shadow Minister in discussing
the building construction of No. 10 Downing street, but I have detected
that, even in this coldest of winters, the political temperature there
is rising for various
reasons.
I
support the motion and am minded to vote for it. Although it is
obviously right, as the Minister says, that the nation state, including
our United Kingdom, makes most of the key decisions about nuclear, for
example, and the other things that have been discussed today, it seems
to me that the very concept of a common market or a single market
increasingly has to involve an energy perspective and an energy
strategy.
We
can all argue about how we divide up the issues on the energy agenda,
but I think there are four major ones. What should come top of the list
is our awareness of climate science and the need to attack global
warming. The European market is significant; we are not responsible for
most CO2 emissions in the world—increasingly,
China
and India bear some of the responsibility—nevertheless we produce
a substantial amount. It is altogether right, in my judgment, that
Europe has set down some demanding targets alongside the national ones.
As we noted earlier, one of the significances of the documents from the
European Commission is that people in Europe who have studied the issue
do not feel that we are on course for meeting our European targets on
greenhouse
gases.
Global
warming is one of the key challenges, therefore, and another relates to
the price and economics of energy. I think I understand what the
Minister was saying, namely that the price of a barrel of oil being
relatively high makes the case for more renewables and more nuclear. It
certainly makes the case for bringing down our energy demand.
Nevertheless, in the short to medium term, a high price for oil can
destabilise economies. Colleagues will remember that before the banking
and financial crisis overtook us, the big economic issue for
Governments, including our own, was when the price of a barrel of oil
moved relatively quickly from $60-odd to $147, as I recall—that
issue exercised the previous Labour Government and, certainly, our
Prime Minister. As a consequence, a big summit meeting was held in
Saudi Arabia, followed by the London summit. However, with the economic
crisis, much of that was forgotten. We were not able to pursue the
consequences intellectually, perhaps, or in terms of policy. The jury
is still out on such a big rise in the price of a barrel of
oil—the situation might be the same today—and what part
was market speculation and what part the global demand for
energy.
With
industries, motorists and so on dependent on consuming great deals of
energy, the price of a barrel of oil at around $100 seems to me to be
an economic concern which I imagine the Minister will be discussing
with his colleagues in the Department for Business, Innovation and
Skills and the Treasury. If the price of a barrel of oil goes too
high—we can all debate what “too high”
means—it is a recipe for slowing down European economic growth.
That is what the research from people such as Oxford Economics showed
when the price of a barrel of oil hit $140-odd last time around. That
economic concern must, properly, be grappled with by the European
Union, as well as by ordinary individual states such as the United
Kingdom.
A
third issue, after climate and economics, is energy security. Many of
us feel that energy security is not simply the question of
supply—where we get the stuff from—but takes on a
geopolitical connotation. In Europe as a whole, we are becoming more
and more dependent on countries outside Europe for our energy. One of
the documents includes a figure for our EU import-dependency for energy
now at virtually
55%.
World
energy resources, which Europe and others depend on, come from regions
and nations—to put it diplomatically—not readily
associated with human rights and democracy, which is a cause for
geopolitical concern. We have been fortunate in the United Kingdom,
although I would hesitate to use the phrase “energy
independence” to describe our past because in the post-war
period we imported oil and so on. Nevertheless, for our energy we
depended initially on wood and trees—what we must now call
biomass—and then along came king coal,
followed by the discoveries in our North sea of oil and gas. That
history has meant that we have not been heavily dependent on imports
for our energy.
However,
with the inevitable decline of oil and gas in the North
sea—although we should not talk it down, because there are still
a lot of resources there, such as west of Shetland—with coal
power stations having to go out of commission and with our old nuclear
reactors having to be decommissioned, we are becoming more dependent on
others for our energy. I therefore think that we should be discussing
energy security more in Europe. Alongside climate, one of the arguments
for renewables, for reducing the energy demand in the UK and for
nuclear, which my colleagues have emphasised, is energy—and
therefore national—security. We should discuss energy more in
those terms in
future.
My
final point is about social justice. It is slightly outside the realms
of the debate, but I note quickly that according to the International
Energy Agency, about 1 billion people in the world do not have
electricity. While in Europe and north America we talk about how to
reduce energy demand, social justice and international development mean
that for some people we need to increase it. There is an issue of
social justice, which makes the problem more
complex.
Here
at home—this has been touched on by two colleagues—we
have the impact of rising energy costs on the customer, which is a
concern for many people on low and middle incomes. The costs reflect
the global demand for energy, which will gain pace as the world comes
out of recession. From memory, the IEA, in “The World Energy
Outlook”, suggests that global demand could increase by up to
35% by 2035. That in itself is a recipe for rising energy
costs.
Secondly, we
need to recognise the implications of that, and rightly so. The
measures that we have put in place across Europe and the United Kingdom
to tackle climate change, such as the renewables obligations, carbon
pricing and feed-in tariffs, increase the cost of energy to the
consumer. Governments have rightly emphasised energy efficiency
measures, and the green deal will be discussed in the House. I do not
know whether I am allowed to ask the Minister another question, but one
that I would ask is this: within the context of green deals and trying
to improve the energy efficiency of all of our housing—not
necessarily 10 Downing street, but it may be included—do we feel
that we are in the right place when it comes to the poorest, the
frailest and our elders? In a world concerned about global energy, our
elders could be forgiven for saying, “In my bedroom and living
room, a chance to have some of that global warming would be a fine
thing.” Although the issue is complicated—I researched it
as a young person—it is nevertheless shocking that people still
die from medical conditions associated with the cold in their own homes
in the 21st
century.
Andrew
Bridgen:
Does the right hon. Gentleman agree that it is a
great shame that for many years, those with the least ability to pay
have often been, due to the choice of payment method, on the highest
tariff for energy in this
country?
Malcolm
Wicks:
Yes, that has been a concern. Some of the supply
companies have moved in a better direction on that matter, but too
often, paying for electricity and
gas is an example of what commentators have for many years called the
phenomenon of the poor paying more than the rest of us.
I
respect ideas such as the green deal, but drawing on years of
experience of trying to tackle fuel poverty, whether through winter
fuel payments, cold weather payments in extremis or insulation
measures, I am beginning to feel that we need to raise the game, and we
need a step change to focus a lot of resource, mainly in housing, on
the poorest and the most frail. Otherwise, some people who are already
struggling with their electricity and energy bills could be in a very
difficult place, as we adjust—as I think we have to, as a
nation, a Europe and a world—to a situation of far higher energy
costs than we have been used to, even in recent
years.
10.50
am
Charles
Hendry:
We have had an extremely useful and wide-ranging
debate, Mr Hollobone. There may have been times when you were inclined
to intervene to ask us to come back on to energy policy. The fact that
you did not do so shows that the issue touches many other policy
areas—clearly, we have talked about the issue in relation to
foreign policy, but it also relates to jobs, prices, consumer
protection, vulnerable people more generally, and the wider economic
picture. All those issues have rightly come into an extremely
wide-ranging and constructive debate this
morning.
In
particular, the speech by the right hon. Member for Croydon North could
have been written by my speech writer, or possibly I have pinched
his.
Malcolm
Wicks:
I do not have one any
more.
Charles
Hendry:
I am delighted that the right hon. Gentleman now
has to write his own speeches. I understand that he writes his own
articles, which is even more impressive. His approach shows the extent
to which there is a determination to try to find common ground. What we
tried to do in opposition—I very much welcome the continuing
approach from the hon. Member for Ogmore—is to see how we can
take energy out of politics and the politics out of energy. If we are
going to find lasting solutions, there has to be cross-party support
for our measures and the direction of travel, and a realistic
understanding across the House about the challenges that we
face.
I
beg to differ over the inheritance, but I will not go into that at this
stage. We perhaps agree that there was work in progress—more
work needed to be done to reform the market, which we are taking
forward; there was work to do on the nuclear side, which we are taking
forward, in looking at the cost-benefits of reprocessing and whether
that should be done with a long-term waste management approach; and we
have made significant changes on ports competition, so that that is
focused on manufacturing projects rather than speculative port
improvements, which will be a better regime. In many areas, useful work
had been done, although there was a delay in recognising the challenge,
to which the five-year moratorium on nuclear was a contributory factor.
We will work with the Opposition, and we hope that they will work with
us as we take such work
forward.
The
shadow Minister raised a significant number of issues, and I will try
to respond to them. For me, the absolute building block is security of
supply. We cannot
have low-carbon or affordability if we have not dealt with the issues
over security of supply. I very much welcome the focus of the
Commission and the European Parliament on those issues, and on what is
necessary to enhance our security of supply generally. I welcome the
work that they are doing on developing new technologies. Sometimes it
is possible to talk for ever about the potential for new technologies,
without ever getting what they can do. We must have a much greater
sense of urgency about how we bring forward anaerobic digestion, tidal
technologies and many other technologies that have real opportunities
to be game changers, but which have not been given sufficient
importance, at centre stage, across
Europe.
One
of the most valuable things that I have found from attending the
meetings of Ministers in Brussels is the extent to which, as a group of
27 nations, we are broadly facing the same challenges and broadly
looking at the same solutions. There are differences between us, but
that shared understanding, and the ability to find what works well in
one country and to transfer that to others, or at least to understand
why it cannot be transferred, is an important part of the whole EU
experience, from which we gain
significantly.
The
shadow Minister picked up some of the points raised about carbon
capture and storage. There is a funding review, and we want to be
absolutely clear that putting a levy on people’s bills is the
right way to stimulate changes. We have already decided that the
renewable heat incentive was not the right way of doing that. I was
particularly concerned about what it would do to fuel poverty, because
people in the greatest fuel poverty are often those who would never
install renewable heat technology, as the payback is over 20 years,
although they would therefore be paying a high price. Rightly, we took
the decision that if the Government want that for the country as a
whole, it should be funded out of central taxation rather than imposed
on people’s bills. An increasing number of elements on
people’s bills bear no relation to the electricity that they are
consuming.
It is right
that we should look at how projects such as CCS should be funded,
whether it is from general taxation or a levy on people’s bills.
We also want time to make sure that the work that we are doing will
factor into the work that is happening more generally across Europe. We
have been encouraged by the number of schemes in Britain that are
bidding into European funding and the new entrants reserve. We now need
to go through those individually. It makes sense that, if there is a
European stream of funding and a British stream of funding, they should
work together, rather than funding different projects, with none of
them achieving their potential. I hope that the work that we are doing
now will lead to a more robust and significant roll-out of carbon
capture as we go
forward.
Huw
Irranca-Davies:
Could it also, in response to my earlier
contribution, lead to an accelerated time scale, bearing in mind the
synchronicities with what is happening within Europe as well? We could
deliver points two, three and four, if the Minister was minded to, on
the same time scale that point one will be implemented. If we have
learned those lessons, we can still do it, even with the European time
scale. It is not only about getting the funding lined up—we
could bring them forward faster. If we learn the lessons from the
competition
that we had, we might be able to streamline that as well. I acknowledge
that there were lessons, and efficiencies, to be
learned.
Charles
Hendry:
I think we have learned those lessons. All parts
of the House have learned that there are ways in which that process can
be streamlined. It will depend on how fast the different technologies
can be rolled out. One of the advantages of the scheme that is being
taken forward is that it is a retrofit. It does not involve building a
new power station at the same time. Had the E.ON facility in Kingsnorth
been taken forward, that would have been two or three years later,
because of the time involved in building a new power plant. It would
depend on the nature of the projects as to how quickly it could be
rolled forwards. We are not looking for reasons for
delay.
We
are also looking to see how we can work internationally. We have a
tremendous range of expertise in our universities, and we want to
enable that to be used more generally around the world. This is a
global challenge. The IEA is saying that hydrocarbons will still be a
major player in 2050, so CCS has to be an important part of that
solution. We should be sharing some of that expertise to achieve the
fastest global
opportunities.
The
shadow Minister also picked up on the issue of localism, and how that
balances issues of energy security and local concerns about individual
applications. We profoundly believe that local communities do not like
the top-down approach from Government. They do not like being told,
“You may have objected to this proposal, but it fits in with a
wider target imposed by central Government, so you have to have it
anyway.” We are removing those requirements and allowing greater
discretion for local communities to decide how they should
evolve.
For those who
worry about that, it is always worth looking at Switzerland, where,
through its system of referendums, it has often come to the most
difficult conclusion, when, if one assumed that it was a very
simplistic debate about, “What does this mean for me?”,
people might have voted the other way. In the end, they voted for the
complicated solution, because it was right. People looked at both sides
of the equation and thought, “Well, yes, we want this to happen.
The plant has to go somewhere, and this is a sensible place.”
What we can also then look at—this has not been the case often
enough in the past—is how real benefits are secured for those
communities that host it, such as through the localisation of business
rates, through looking at whether anything can be done on
individual’s tariffs or through much more community ownership.
The people who have not so far been involved have said, “My
library was kept open through that facility”, or, “My
roads have been maintained better”, or, “This degree of
social services is being maintained.” They can link it to the
direct funding
stream.
Huw
Irranca-Davies:
I welcome that approach, which is in the
planning Bill and is to do with much more community input at an early
stage about what the community aim might be. However, there is concern
about anaerobic digestion and any other form of microgeneration on a
community scale and what it will do to the time scale. In the
Minister’s vision, does he
believe from his discussions with the DCLG that communities and the
people who provide the alongside investment will have the right tools
to make community-scale initiatives actually happen, or will people be
put off by such delays? What happens in the model that he referred to
with the international examples? Does it take additional time for those
to proceed through
referendums?
Charles
Hendry:
One has to look at this in totality, with the
funding streams becoming available as well. If we look at things such
as the renewable heat incentive or feed-in tariffs and how they will be
ultimately structured, there is a real incentive for communities to
say, “How do we use the roof of the village hall? How do we use
the school roof? How do we use this piece of derelict
land?”
A
big change will be made. Councils will actually be allowed to sell
electricity into the grid. Now they are considering being not just
passive participants, but companies involved in generating the
electricity and selling it. For dead land—isolated, cut-off and
old brownfield sites—that offers a real potential for finding
ways to bring it back into use. That will need much greater community
acceptance, as we have seen, particularly in Scotland, where local
parish councils and communities have been much more supportive of some
renewable developments, because they can see exactly what is in it for
them. That is what has been missing sometimes and what we are hoping to
put
right.
The
shadow Minister asked how decarbonisation is working across the
Government and about progress towards electric vehicles. Work is going
on within the European Union on, for example, the standardising of
vehicle charging. That is important because when we have a wide
roll-out, we do not want get across to the continent and discover that
we cannot charge up our vehicles and have them all stacked up in Calais
unable to move any further. There are areas where such co-ordination is
clearly an important part of the roll-out of a policy. We must be
cautious of other areas where technically trying to find a perfect
standard for everyone is a barrier to progress. We must have a clear
understanding of the distinction between the
two.
The
shadow Minister drew attention to biofuels. We set much greater clarity
on the sustainability criteria for them to ensure that the land could
not have been used for other resources and that we do not have the
“food or fuel” debate. The next generation of crops
coming through will tackle that, as they can be used for food
production and for biofuels. The whole biofuels-biomass debate is an
important part of achieving the targets, which we want to do, but the
public want us to do it in a way that is truly
sustainable.
The
shadow Minister said that the previous Labour Government had not
finished work on gas storage. They had not really started. They had not
recognised the extent of the emerging challenges. Our own gas resources
were declining as a consequence of the dash for gas, which required
much more gas to be burnt in electricity generation. It takes about
five years to build a major facility, but he is absolutely right:
giving it consent does not make it
happen.
We
must have in place the right market structure, which could become more
challenging as a result of new LNG interconnectors. Moreover, if people
consider
that a market price will not be paid for gas in storage, what will be
the consequences? We are looking at whether more is needed, but the
major change that we are making at this stage is moving from modest
penalties on companies to much harsher penalties in the event that they
cannot meet the obligations. In those circumstances, they have a much
greater incentive to invest in storage facilities either on their own
or contracting it out and taking that
forward.
The
hon. Member for Linlithgow and East Falkirk talked about long-term
contracts and contrasted them with other countries. We have not done
well enough. We ought to have many more long-term contracts, and we
will be active participants in such matters. However, there is another
side of the equation. The Germans, who rely significantly on long-term
contracts, were concerned when they locked themselves in well above the
market price for gas and the gas price fell. The reality is that, if we
have more long-term contracts—but not as many as the
Germans—that delivers price security. Such an approach takes out
some of the spikes and delivers security of supply, but it does so in a
way that is constructive and can still
evolve.
Malcolm
Wicks:
I am interested in what the Minister said about
long-term contracts. He implied that the Government would help to
facilitate them. How would they intervene in the market to ensure that
is true and that we have more long-term contracts in the
future?
Charles
Hendry:
Many discussions are with Government-owed
companies. Let us consider Qatar Gas, owned by the Qatari Government.
Even the Norwegian Government owns companies. There is a different
relationship between those companies and their Ministers than there
often is here. The role that we can play is to show at the highest
levels of government that we attach importance to such companies and
that we are keen to facilitate taking the agenda forward when we meet
our ministerial counterparts in those countries. That shows the same
approach that they have been used to with France, Germany and others,
where there is much greater Government attention to securing contracts
than has traditionally been the case in the United
Kingdom.
The
shadow Minister then expressed concerns about shale gas. I understand
those concerns. As he will know, there is one licence operating in the
United Kingdom only, which is in the constituency of my hon. Friend the
Member for Fylde, and everything that he has seen—I am going to
visit before giving evidence to the Select Committee—shows that
it is meeting all the requirements from the Health and Safety
Executive.
In
this country, one of the most important things that we have, which
America has learned, is the separation of licensing from safety. That
applies offshore, as it does onshore. If the shadow Minister has
concerns, I hope that he is taking them up with the Health and Safety
Executive. From our contact with it, I can say that it seems satisfied
with the safety mechanisms that are in place. If he has a specific
concern about that individual plant, he needs to be clear that that is
what he wants to prevent. Our model of safety and security is
important. There are areas where we need to co-ordinate that across the
Government, including talking to my counterparts in DEFRA and ensuring
that we are in
close contact with the HSE, so that we do not just see this as a
licensing issue and take account of emerging concerns in the most
constructive way. I am not yet persuaded that we need a
moratorium.
Huw
Irranca-Davies:
I understand that this is a matter of fine
judgment. In response to the Minister’s query, I just want to
clarify that the issue is not with Cuadrilla’s application, but
with the others that might be in the pipeline. We need to ensure that
we have guidance from the Health and Safety Executive and from the
Environment Agency. We also need guidance from the Department for
Communities and Local Government, because this is a completely new kind
of planning application for local authorities and they do not know the
scale of either the exploratory drilling or of the full-scale
commercial
exploitation.
The
Minister is actively looking at the issue. I trust that he will speak
to other Ministers to ensure that everything is in place. However, I
urge him to scan across the Government—there is probably time,
depending on the Energy and Climate Change Committee—to ensure
that the correct guidance and regulations are in place. We do have the
highest standards in this country, so that gives me some assurance, but
I do not want us to sleepwalk into this, because many companies might
want to exploit this energy
source.
Charles
Hendry:
That the shadow Minister is not looking for a
suspension of the Cuadrilla licence, which is the only one in the UK at
the moment, is a useful clarification. He might be reassured to hear
that no licence applications will come to me for approval before the
Select Committee reports. My hon. Friend the Member for Bracknell, who
serves on the Select Committee, is here, and I have always tried to
liaise with other Departments before appearing before his Committee,
which is so assiduous in the way in which it delves into many such
matters. It will be an important investigation, and I am grateful to
the shadow Minister for the
clarification.
We
had a significant discussion on energy efficiency, and I hope that I
can give clear reassurance to the right hon. Member for Croydon North
on how we want to take it forward. He will recall that, when previous
Energy Bills went through Parliament, there were debates about
engagement with Macmillan, and that is continuing, because we are
looking at how we give the most help to people who are the most
vulnerable because of fuel poverty, illness or disability.
Understanding
how the energy efficiency programme can be prioritised is part of those
ongoing discussions, because we want those real benefits to come to
those who need them most. That calls for a massive step up. It could
create 250,000 jobs involved in improving the energy efficiency of our
housing stock, and that is a massive change in ambition, scale and
delivery. There will be additional support for hard-to-treat houses, as
it is not a one-size-fits-all approach. We are looking for mechanisms
where the payback will be greater than the initial cost, so that the
consumer will get the benefit from day one, as they then start to pay
back the total cost over a 20 or 25-year period. The extent to which a
whole range of companies, retailers, banks and many others have said
that they want to be a part of delivering that has been encouraging.
Consumers will have a real
choice, but we want to ensure that the poorest and the frailest have the
warmth at the earliest stage, because we understand how critical that
is for
them.
The
shadow Minister mentioned some of the community gains and combined heat
and power. Again, the renewable heat incentive will be a key element.
That is not a specific EU proposal, but we are keen to take it forward
in the United Kingdom. We will, however, be driven by evidence.
Sometimes, there is a Christmas-tree approach, whereby we think that we
must include a bit of every technology somewhere. We have to be driven
by the evidence of what will make the biggest contribution towards our
carbon reduction commitments in a way that is most affordable for
consumers in the fastest time scale. That requires choices to be made,
but CHP is very much an important
element.
Huw
Irranca-Davies:
The Government’s innovations in
progressing renewables heating and in evolution when we come to the
renewal of the FITs are to be welcomed. However, I am want more from
the Minister. I am genuinely thinking about the issues at the moment.
Part of energy efficiency goes alongside the Government’s
willingness to find mechanisms that will roll out in a much larger
way—not simply the rhetoric on combined heat and power or the
odd visit here and there to a good pilot example, but, if we really
want to tie things together, the ability to insulate, for want of a
better word, fuel-poor communities against the rising costs of energy
and of heating their homes. If there was some real thinking through,
the renewable heat incentives, the FITs and other mechanisms could be
used not only to benefit individual households or farmers putting
photovoltaics on the roof, but to do community-scale, widespread
innovation. That would be a good way, for two decades and more ahead,
to insulate fuel-poor communities against rising prices. There is some
unfinished thinking
here.
Charles
Hendry:
The thinking is constantly evolving in all areas.
We have looked at how the carbon reduction commitment and the community
energy saving programme could be taken forward with a new obligation on
suppliers to target those most in need and to focus energy efficiency
work on their homes as a priority. We must have another radical look at
how fuel poverty is assessed, given the comprehensive failure to meet
the targets put in place for 2010, as well as the challenging issues
for 2016. I totally agree that the situation needs to be seen in its
totality.
Once
the funding mechanism is entirely clear, we will see the development of
energy service companies, community-based groups looking at the
particular resources and problems in their communities and at dealing
with how they use the solar, wind and renewable heat potential
community-wide. Doing such things on a wider scale often makes much
more sense than every single house having someone to come along and
install its energy efficiency or renewable heat
measures.
The
final point on consumers and fuel poverty was made by the hon. Member
for Linlithgow and East Falkirk. That must be at the heart of what we
do, because we must secure energy in the long term. We are taking
decisions now that must be right for 2020, 2030
and beyond. I am not prepared to take any risks with how we deal with
energy security, but we must also keep a close eye on what it means for
consumers. We were disappointed by the increase in prices announced by
some of the companies before Christmas—EDF, to its credit, at
least delayed implementation until after the winter. I am pleased that
Ofgem is now looking into the profit margins made by those companies,
to see what further steps will be
necessary.
My
hon. Friend the Member for North West Leicestershire made an important
point about some of the tariffs, prepayment meters and such issues.
Some of those who are least able to afford the bills end up paying the
highest tariffs. I hope that some of the benefits of smart metering are
that people will never receive an estimated bill again and that they
will be on a better and more suitable tariff. If we look at the
Northern Ireland experience, where smart meters are widely rolled out,
prepayment meters have lower tariffs than the standard. Consumers can
make real gains in that
process.
Huw
Irranca-Davies:
On the 2020 report, may I urge the
Minister to press the issue of simplifying and clarifying bills
throughout the EU? If we move to a more liberalised market, with
providers going both ways throughout the EU, consumers will need to
understand how to access the cheaper, more affordable prices. They do
not want to have an even more complicated system, when the other
providers come in. The Minister will have our support if he will,
please, push hard on
that.
Charles
Hendry:
Some measures certainly need to be done at an EU
level, and product labelling is part of that. We want to see such
labelling extended from white goods to brown goods. Everyone, when they
go to buy a television or something such as that, will look at its
energy efficiency. Such labelling has meant that fridges, for example,
are now all top rated, because no one would try to sell one that was
not any more. That has really helped
consumers.
We
ought to look at clarity in bills domestically as well. We want
consumers to have more useful information. We have seen a lot more
information, but it gets to the point of being blindingly confusing.
Too much information can be worse than not enough. Making sure that the
information is accessible and relevant is now part of our
challenge.
We
have already shown our determination to act if we see areas of concern.
For off-grid customers, affecting many in the debate, we have asked the
Office of Fair Trading to look into how the market is operating,
because they are vulnerable in particular to the huge price increases
that we saw before Christmas. We have shown that we are prepared to do
work there. If the market does not appear to be working, we want to be
absolutely clear that it is and we will ensure that that applies more
generally.
The
final point that I would make in an extremely valuable, wide-ranging
and useful debate is that it has shown the interconnectivity of many of
the energy issues throughout Europe and why we have common ground for
addressing them comprehensively. The documentation is helpful. I also
think it would be helpful for Heads of Government to focus on the issue
at the end of this week.
We should
recognise the contribution that Britain is making—the British
officials in the Commission and the work they are getting from our own
officials, which is important—and the leadership of Fiona Hall,
who leads for the Liberal Democrats, and Giles Chichester and Martin
Callanan on our side, with others from the Labour party. They are
punching well above their weight in driving the debate forward and in
contributing towards ensuring that we have secure and affordable energy
in a low-carbon
way.
Question
put and agreed to.
Resolved,
That
the Committee takes note of European Union Document No. 16096/10,
relating to a Commission Communication on Energy 2020: A strategy for
competitive, sustainable and secure energy; and agrees that the
Commission’s Energy 2020 strategy is an important step towards
defining the EU’s energy policy over the coming decade and will
underpin Europe’s move to an energy-secure, low-carbon
competitive
economy.
11.16
am
Committee
rose.