Session 2010-11
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General Committee Debates
European Committee Debates

Energy 2020

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

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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

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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

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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. 

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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? 

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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

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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.

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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. 

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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? 

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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

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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. 

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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

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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

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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

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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.

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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,

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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

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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

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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. 

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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

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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.” 

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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

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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. 

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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

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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

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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

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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

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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. 

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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

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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,

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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

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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

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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

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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

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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

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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

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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

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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

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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. 

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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. 

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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.