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General Committee Debates
Welsh Grand Committee Debates
|©Parliamentary copyright||Prepared 11th March 2011|
Publications on the internet
General Committee Debates
Welsh Grand Committee Debates
UK Government's Energy Policy
The Committee consisted of the following Members:
James Rhys, Committee Clerk
† attended the Committee
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): On that point, may I say—and I am sure that I speak for the whole Committee—how encouraging it is to see my hon. Friend so quick off the mark in this sitting?
I was saying that there is a lack of transparency in the market, and making real comparisons between the different deals is difficult, especially for lay people. The industry seems to be competitive, but some people, including my constituents, think that that is illusionary, and that large players in the business have a profound influence on prices. That affects people’s ability to buy sufficient gas ahead, especially in critical periods such as Christmas.
I understand that the Office of Fair Trading has looked at the industry, and concluded that there was no problem with competition and, by implication, with supply and its robustness—the crucial point that I was making this morning. It pointed to the healthy, large number of small suppliers at local level, but I understand that some large players have bought some of the smaller ones, and may have achieved a dominant market position. The main supplier, Stanlow in Cheshire, has a profound effect on the robustness of supply. Given that possible market dominance, does the Minister think there is room for the OFT to look again at LPG supply? I will be interested to hear his opinion, either now or by letter.
Nia Griffith (Llanelli) (Lab): I wonder whether the hon. Gentleman is also aware of the problem of LPG gas contracts, which fix people to a contract for a period and from which they cannot escape. Although the OFT rejected that problem first time round, it reopened its consultation. Perhaps he will press the Minister to explain what has become of the answers that we were expecting from that further investigation.
Hywel Williams: I thank the hon. Lady for her intervention. I have recently had correspondence with a supplier, while trying to get one of my constituents out of a contract. He said that he was held by golden handcuffs because the initial deal was so good, but he is now regretting at leisure.
On the renewable heat obligation, I want to press the Government to consider the possibility of providing additional help for people who use LPG to enable them switch, perhaps to heat-source pumps or woodchip boilers, in rural areas where there is no piped gas.
Does the Minister see a greater role for emergency planning for contingencies such as the interruption of supply in extreme weather? I referred this morning to the break in supply for my constituents around Christmas. The OFT has also been investigating the supply of home fuel oil, and in my rural constituency, as throughout Wales, many people will look at the result of that investigation with interest.Turning briefly to the Energy Bill, I want to relate some of what I said this morning to it, and to the green deal scheme, of which we heard a little this morning, which aims to encourage the uptake of energy efficiency measures in the housing stock. There has been a coalition of several groups in Wales—Friends of the Earth Cymru, Haf Elgar from that organisation, NEA, Shelter, Oxfam, National Association of Citizens Advice Bureaux and many others. It put together a useful briefing before consideration of the Energy Bill, and I recommend it to hon. Members on both sides of the Committee. The briefing points out, for example, that private rented homes in Wales are the worst maintained parts of housing stock. They contain many vulnerable households and people living in fuel poverty. People in rented private houses are over four times more likely to live in cold homes than those in social rented houses. More than a third of private rental tenants in Wales are fuel-poor; the private sector has a greater proportion of the most energy-inefficient homes—those in band G—and they are twice as common in the private rented sector as in other sectors. So there is a particular question here.
The 2008 Living in Wales data showed that, on average, an E rating is the most common in private rented properties—lower than in any other kind of tenure. As we heard this morning from an Opposition Member, there is a particular problem in Wales with houses with solid walls—there being no cavity to fill.
Friends of the Earth Cymru and the others have called for tenants to be empowered—as the word is now—through access to high quality and reliable information about the energy performance of their properties to enable them to make informed choices. This is even more critical given the Government’s proposals on housing benefits. Restricting housing benefits to the bottom third of the private market will, I am certain, drive poorer households dependent on benefits not only into cheaper accommodation but into the poorer quality end of the market, where the standards of energy efficiency are lowest. Unsurprisingly, I am against the proposed changes. I believe they show clearly that this is not just a matter of empowering individual consumers—important as that is—but there are structural considerations as well.
Friends of the Earth say that landlords need information about the full range of measures that can be taken to improve the energy efficiency and carbon emissions of
The Welsh Government have high ambitions for energy efficiency in homes. Fuel poverty is, of course, an enormous problem in Wales and the Energy Bill will be an opportunity to tackle that problem. I hope the Minister can reassure me that the Government here will take full advantage of that opportunity.
David T. C. Davies (Monmouth) (Con): May I say what a pleasure it is to serve under your chairmanship, Mr Caton? I am sure I will learn much, as I chair the Welsh Affairs Committee, from esteemed colleagues such as your good self.
May I also say that it is a pleasure to debate energy policy as it relates to Britain at the moment? This is one area that has not yet been entirely devolved to the Welsh Assembly. As a proud Welshman and a proud British citizen, I have never been a supporter of the Assembly, but I support the fact that it is there and needs to be able to work as effectively as it can for Wales. It is no secret that I voted against further powers for the Assembly, but I fully accept—like any democrat—the results of the recent referendum. I look forward to working with the Assembly and trying to make a positive contribution to it on energy and all other matters.
I took some heart from the result of the referendum campaign, which showed that the vast majority of people in Wales, while supporting the Assembly in some form, also believe that many powers need to reside at Westminster. Energy is a case in point. It was interesting that so many of those who campaigned for a yes vote were saying, “We’ll go this far, but we don’t want to take it any further. Don’t listen to the nationalists—David T. C. Davies: I will in a minute—I would be delighted, but let me finish because I was just about to talk about the nationalists. Many of the yes vote supporters were campaigning in Caerphilly along the lines of, “We will not campaign with the nationalists, because unlike them, we think that these powers will be enough and we don’t want to see it go any further.” They campaigned for a yes vote on the basis that they were supporters of the Union. I would be delighted to hear a contribution from the right hon. Gentleman on that.
David T. C. Davies: No. Let me correct the right hon. Gentleman. His memory deceives him. I said that I would take no part in the campaign and I did not. However, I also said that people had a right to know what my views were, and I let them know, but not under the umbrella of the no campaign. I had no involvement in any of the campaigners’ meetings. They held a public meeting in Usk, Monmouthshire, just before the referendum. I was asked to go along and speak and I declined on the basis that it was important to maintain neutrality. I do not have any sort of a guilty conscience about that.
Let us return to energy, which, as I said before, should remain the prerogative of the UK Government. One way to ensure that is to allow the only part of the United Kingdom that does not yet have its own Parliament to have one. I refer of course to England. If we did that and we made it clear which parts of energy and other policies were to be devolved to the regional assemblies and which parts were not, we would underpin the Union in a way that supporters of the Assembly and people concerned about the Assembly could thoroughly support. All those in favour of the Union of the United Kingdom—I think most of us in this room are—could support the idea of an English Parliament to underpin that Union—we need to consider that.
Geraint Davies (Swansea West) (Lab/Co-op): Surely there is a problem here of David and Goliath. Wales has only 3 million people out of 60 million. Would the hon. Gentleman’s case not logically lead to 20 separate legislatures of 3 million people dotted around England? If not, it would be very unbalanced.
Let me return to energy, which is the subject that I most wanted to talk about. I am a big supporter of the Government policy of reducing our requirement for carbon-based fuels. I have a slightly different reason for supporting it. I am not convinced that all of the temperature rises that have taken place over the past 250 years are a result of man-made carbon emissions. We have had warmer and colder cycles over the past 2,000 years. It was warmer when the Romans were here, then it got colder through the dark ages and then warmer again. It got cold during the little ice age. Coincidentally, the little ice age ended at about the time that we started to develop the steam engine and to industrialise. Therefore, the earth would have been getting warmer quite naturally anyway because we were coming out of a cold period. Most people who have looked at the facts would find it
David T. C. Davies: I do not know whether the right hon. Gentleman is referring to a medical doctor or one of those people who have gone off to a polytechnic and done one exam more than anyone else, but I am neither. None the less, I know how to read statistics properly. I am also not convinced about the arguments over peak oil.
Geraint Davies: Does the hon. Gentleman not accept now that some 99% of the scientific community say that if we look at a simple chart, global warming can be explained through natural causes—the sun, earthquakes and so on—to a certain extent. However, if we take all that out, the differences in temperatures over the last couple of hundred years can be explained by human activity. That is not doubted by anybody other than the hon. Gentleman and a few other maverick planks.
David T. C. Davies: The hon. Gentleman should look at what I said. I said that I am not convinced that all the rises in temperature have taken place as a result of man-made carbon emissions. I am prepared to accept that some of them have, but I am not prepared to accept that all of them have. All too often, the argument is framed by people who say, “This is the rise in temperature, and it’s all down to the fact that man has been emitting carbon.” That is their message.
I am not convinced of the argument about peak oil, not least because many of those who advocate it make similar arguments about global warming. If we stop and think about it, it is not entirely logical to say, “Mr Davies, stop all carbon emissions. Stop taking oil from the ground and burning it, because it’s heating up the earth,” and the next week to say, “Mr Davies, the oil is about to run out, so we must start to build an economy based on basket weaving and other stone-age skills, because that’s all that’s going to be left.” That is fine if people believe it, but they should stop worrying about global warming. If the oil is about to run out, we will not be burning any more of it, so the earth will not be getting warmer.
David T. C. Davies: The hon. Gentleman says that it is a conspiracy. Although I do not always communicate very well, I read the arguments on all sides. I have children and I hope one day to have grandchildren, and I do not want to do anything that could damage the earth.
What worries me when I make these comments or raise these questions is that people look at me as if I have just blasphemed. Indeed, it is worse than that, because blasphemy is perfectly acceptable these days.
I agree thoroughly with the idea of doing away with our dependence on carbon, because of the instability of the regions from which we derive most of those fuels. Our gas comes from parts of the middle east and the former Soviet Union. Our oil comes mainly from the middle east, and about 10% or 15% comes from Saudi Arabia. Much of it has to be transported through unstable parts of the world. It makes sense from any point of view to reduce our reliance on gas and oil because we cannot rely on the regions that currently supply it.
What we should be doing, and are doing to some extent, is thinking about alternative methods of energy generation. We hear a lot about wind power. I am not against it, and it has its place, but it will never be able to supply the base load of electricity that we need. We are never going to be able to rely on wind power to supply the large amounts of electricity that we need—especially when we need it. That is another reason why we were right to think carefully about going ahead with the Severn barrage. Although it may have been able to generate the large amounts of electricity being spoken of—everyone accepts that it was a first, so we would have had to wait with bated breath to find out—it could not have generated that electricity exactly when we needed it. One of our biggest engineering problems is that there is no efficient way of storing electricity.
Simon Hart (Carmarthen West and South Pembrokeshire) (Con): I wonder whether my hon. Friend knows that during the recent cold weather over Christmas, up to 20% of the UK’s gas supply came through two terminals at Milford Haven; at about the same time, slightly less than 2% of our energy requirements were delivered by wind power.
David T. C. Davies: My hon. Friend makes an important point—one that we should think about. As for a solution that should make everyone happy, from the most ardent environmentalist to the most realistic user of oil or gas, the obvious answer to the problem of how to get large amounts of electricity when we need it is to use nuclear power.
Hywel Williams: There is of course another way to store electricity. The prime example in the UK is in my constituency, in the Dinorwig pumped storage scheme. It can produce sufficient electricity to supply Manchester for three hours at the flick of switch—within eight seconds. If we had more such facilities, we might be able to store electricity more efficiently.
David T. C. Davies: The hon. Gentleman makes an important point, but such systems are still not 100% efficient. Using water turbines—placing water further uphill than the turbine—is only about 80% efficient. That is still good, but it will work only with the right geography. It will not be available across the United Kingdom. I welcome the idea, but there are other means.
We can use electricity generated from wind to run electric currents through water to generate hydrogen, which is being used in cars and buses, but that technology is decades away from being affordable. There are solutions in the future and over the next few decades, but we face a problem right now in that many of our power stations—coal, gas and nuclear—will close in the next 10 years, and there simply will not be enough electricity.
Again, the environmental movement needs to think about this. At the moment, there is a lot of good will towards it—most people in most parties have signed up to most of the agenda—but we are all politicians and we recognise some realities here. If the flat-screen TVs go off and the lights go out, the public will not be worried about the possibility of global warming in 50 years; they will tell politicians of all parties, “Get your act together right now. Get the electricity back on right now, and we don’t care how you do it.” If we are not prepared to do it in the quickest way possible, someone else will get elected who will, and that will probably mean coal-fired power stations going up all over the place. So we need to think about that, and the environmental movement needs to think about it as well.
Nuclear power does not generate any carbon dioxide emissions. It is reliable. There is no issue about security of supply. People say that the uranium is going to run out in 50 years’ time, but most of it is mined in places like Australia, which are inherently stable countries. We do not have more than 50 years’ worth that we know about because we are not looking for it. In any case, there are two isotopes of uranium, and for reasons that scientists could explain better than I could, we are only using one of them at the moment. The other isotope is in plentiful supply, and we could adapt and use it if we wanted to.
Mrs Siân C. James (Swansea East) (Lab): In evidence given to the Welsh Affairs Committee in the past two years, the nuclear energy providers admitted that uranium was a finite resource. When they were asked about this question, they said they currently had lots of people out there looking for more uranium. So we do not have a steady uranium source; it is depleting rapidly, and they are desperately searching for more.
The answer to the hon. Lady’s point is that there are two isotopes of uranium— uranium 235 and uranium 237—one of which is in use in most nuclear power stations across the world. I think it might be—I listen out for inspiration. Let me guess that it is 235, and there is apparently about 50 years’ worth left. The other isotope can be used in certain types of nuclear power stations, most of which are under test at the moment. There is a lot of it about, and if the supply ever fails—I think that there is several hundred years’ worth—then it is possible, believe it or not, to get fissionable material out of sea water.
There are plenty of alternatives to the currently used uranium, of which there is a 50 year supply. So I do not think that security of supply will ever be an issue with nuclear power stations. In any case, the next generation of nuclear power stations would only be expected to last 50 years or so—so this is unlikely to trouble us—by which time one would hope that we would have developed cold fusion plants and might have moved on in technological terms.
The Secretary of State for Wales (Mrs Cheryl Gillan): I have been listening carefully to the hon. Gentleman. He may also like to welcome the extension of the Wylfa project’s life, because that is really important in relation to the Nuclear Decommissioning Authority finding ways of extending the life of nuclear power stations and to the more efficient use of rare fuel supplies that we have left. That is a good thing both in terms of income and in getting maximum use out of the facilities.
David T. C. Davies: I thank the right hon. Lady for that. I do welcome it very much, but not as much as the Member of Parliament for the Wylfa area, because one of the amazing things about nuclear power stations is that the most enthusiastic supporters tend to be the people in whose constituencies they are built—once things have had time to settle down—because of the wide range of well-paid, highly skilled jobs that they provide. Even MPs—dare I say it?—whose political parties are not known for supporting nuclear power have a sudden change of heart when somebody threatens to close one down in their constituencies.
The hon. Member for Newport West, who is no longer in his place, asked me, “How would you like it if there was one in Monmouthshire?” The answer is that no one wants to live next door to a nuclear power station, or a gas-fired power station, a coal station or an industrial estate of any sort. We all like our houses to be in nice residential areas with other houses. My constituency is opposite the Oldbury nuclear power station, which has been there for many years, but it has not been a big problem for the vast majority of people in the constituency, and it will not be if it is rebuilt.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones): My hon. Friend is making the accurate point that those who live near nuclear power stations frequently do not mind them, but many politicians support them. The prime example is the hon. Member for Ynys Môn. Even more remarkable, will he not acknowledge, is the conversion of the Assembly Member for Ynys Môn, who is the leader of Plaid Cymru—a party that is opposed to nuclear generation but nevertheless supports it in his constituency?
David T. C. Davies: I think the road to Damascus obviously leads to Ynys Môn. I have covered the referendum, global warming, the energy crisis and nuclear power. Many other Members want to speak, and I am happy to sit down and listen to their contributions.
I should like to take the Committee back to February 2010, when my right hon. Friend the Member for Doncaster North (Edward Miliband), then the Secretary of State for Energy and Climate Change and now the leader of my party, announced a feed-in tariff regime, which encouraged businesses, such as Kingspan in Holywell in my constituency and Sharp in the constituency of my hon. Friend the Member for Wrexham, to continue to develop the potential for photovoltaic cells to be placed on buildings for the microgeneration of electricity. Electricity supplied using the feed-in tariff procedure provides income for those who generate it.
Given those comments, I was very surprised that, on 7 February this year, the Secretary of State for Energy and Climate Change announced in a written ministerial statement that he had ordered a review of the feed-in tariff regime that the Labour Government initiated in February 2010.
Roger Williams (Brecon and Radnorshire) (LD): I commend the right hon. Gentleman and the hon. Member for Wrexham for the support they have given to the photovoltaic industry. However, if we reflect on the experience of feed-in tariffs in certain continental countries such as Spain, should we not be cautious? In Spain, demand was so great that the money ran out, and there was a complete cut-off in support. Surely, we want more sustained support, even if at a lower level than we first hoped.
Mr Hanson: Let me return to that point. The Secretary of State for Energy and Climate Change has said that there will be a review of feed-in tariff regimes over 50 kW. A 50 kW regime is a very small regime. It will not generate—produce energy—for more than one, two or three potential properties. As the Secretary of State said in his statement of 7 February, he is concerned about the potential development of large-scale wind farm-type developments to develop solar energy. Such large-scale facilities could suck in all the resource, killing off the golden egg of generation through feed-in tariffs.
To date, there has been only one planning application anywhere in the country for such a regime and it is not off the ground yet, but that was a threat that the Minister took seriously. My plea to the Ministers today is to look at this in a Welsh context, because we can certainly stop widespread, large-scale solar panel farms by all means, if that is an issue that the Minister is concerned about.
The point that I raise with the Minister—it will be shared by my hon. Friend the Member for Wrexham, in relation to his constituency—is that Kingspan finds
I am not trying to make political points out of this; I want to ensure that the Ministers raise these issues with their colleagues in the Department of Energy and Climate Change, and of course in the consultation. Our difficulty is that Kingspan—which has put money in place to invest and has people working on those issues, who are, like Sharp’s factory in the constituency of my hon. Friend the Member for Wrexham, producing photovoltaic cells—finds itself faced with no feed-in tariff proposals after August and the potential for a review, which could kill the market completely because of the proposals made by the Secretary of State for Energy and Climate Change. I say that not because David Hanson, the Member of Parliament for Delyn, knows about those issues in detail—I do not. I say it because Kingspan, a company in my constituency, has raised those concerns with me.
“Kingspan has accelerated the roll-out of modular photovoltaic systems fixed onto our insulated roof panels following introduction of the Feed in Tariff last year. These systems provide the unique benefit of a high performance insulated building envelope to reduce energy demand coupled with a highly efficient PV system to provide renewable energy to minimise carbon emissions and save energy costs.”
We are at the cutting edge of that technology in north Wales. We have firms—Kingspan, and in Wrexham—that are at the cutting edge. Indeed, the Secretary of State for Energy and Climate Change, when 300 jobs were created earlier this year, with an effect on my constituency and that of my hon. Friend the Member for Wrexham, praised the fact that the job creation came about due to the existence of the feed-in tariff. We now find that that certainty has gone.
Let me put that into context for the hon. Member for Brecon and Radnorshire, who has raised the issue. The current regime, which is above 50 kW and which the Government are reviewing, relates to schemes being produced by Kingspan in Holywell, creating jobs now. Let me give examples: a 121 kW new build at the Holt Wellbeing Centre, the Isle of Sheppey academy at 98 kW, Kent university at 200 kW, Great Harwood Tesco at 100 kW, Quantum business park at 173 kW, Henley college at 80 kW and Home Farm primary school at 61 kW. They are all schemes of above 50 kW that are being undertaken by Kingspan, but the like of which can no longer be commissioned because the 50 kW cap has been put on, pending review.
These are not, by any stretch of the imagination, widespread, massive farms the like of which the Secretary of State for Energy and Climate Change has said he is concerned about. Great Harwood Tesco, a new-build project with 100 kW of regeneration on its roof, is creating jobs in north Wales, providing energy efficiency in Lancashire, and producing sales and tariff that can generate electricity. However, that type of scheme could go to the wall because of the decision made by the Secretary of State for Energy and Climate Change.
“In pulling back on a commitment to support solar energy, the Government will cause the abandonment of scores of ‘Big Society’ community-owned schemes and hundreds of other developments that could have seen individual parishes benefit from up to £25,000 every year and more local jobs created… The ill-conceived and dangerously short-sighted proposals will have further unintended consequences, including the Government missing a European target of generating 30% of electricity from renewables by 2020, and therefore incurring significant fines.”
Gilbert McCarthy, managing director of Kingspan, wrote to the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), on 15 February about the matter:
“As a low carbon business, we pay particular attention to the policy framework impacting on our products and monitor Government statements closely. We were therefore acutely aware of DECC’s legitimate concern… over large ground-mounted systems… but astonished to see the fast-track review extended to very modest roof-mounted systems of 50kW for which there was no warning. A number of ‘made in good faith’ investments… are now at risk.”
I do not want to take up much of the Committee’s time, but I hope that the Minister will reflect strongly on what I have said. This is about future jobs in north Wales, and I would like to receive some clear indications from him in his winding-up speech. I hope he listens to and reads what I have said and what businesses are saying about wealth generation. I also hope he will go on record today to value the solar-voltaic industry in north Wales. I hope that he will stand up—privately, I accept, outside the room—to the Secretary of State for Energy and Climate Change and press him to ensure that, whatever he does in response to the review, he does not end the potential for 50 kW to 500 kW schemes. They will deal with big supermarkets, big schools, academies and universities, but are not going to be solar-voltaic wind farm-type schemes, as elsewhere in the UK.
I hope that the Minister will raise those issues with DECC; report back to Members, including me, on his discussions; and, when the consultation comes out shortly, ensure that there is a Welsh dimension, because these are the jobs of tomorrow. I am not trying to make political capital out of the current procedure, even though I could. I am simply making the case that, if we go ahead as planned, he and the Secretary of State for Energy and Climate Change will destroy jobs for the future in north Wales.
I hope that the strength of my feeling is clear to the Minister and that in his response—and, more importantly, in his discussions outside the Committee—he will take those matters on board. It is one thing for Conservative Ministers and Liberals to come to Kingspan in Holywell and praise it, as they have done during elections and at other times, but quite another for them to undermine its business when they are in power.
Mr Hanson: Who am I to refuse such a generous offer? I will happily ensure that the Minister is invited to Kingspan, but I hope that, when he comes, he takes away those messages and uses his position in Government to influence them. I will judge him not on his visit and a smiling picture at Kingspan, but on the outcome of his discussions with the Secretary of State for Energy and Climate Change.
Mr Hanson: I will take the Minister up on that. I will copy in the Secretary of State for Wales on the letter and judge the Government on the outcome and on whether we are able, at the end of this process, very quickly ensure that businesses can access 50 kW to 500 kW schemes, rather than simply facing a blanket approach, which, unfortunately, the Secretary of State for Energy and Climate Change has adopted. Such an approach could destroy the golden egg in north Wales.
Guto Bebb (Aberconwy) (Con): It is a pleasure to serve under your chairmanship today, Mr Caton. I will keep my comments brief and make just a short speech. It has been an excellent debate so far, and I have enjoyed it thoroughly. As a Member of Parliament for north-west Wales, it is important to point out that the economy of our part of the country could benefit immensely from the development of the energy sector. Such development would have a large regional impact.
I want to put on record my appreciation of the development in Anglesey. The hon. Member for Ynys Môn is not here today, but the Anglesey energy island development is hugely important in the context of the economy of north-west Wales. That development is centred on the fact that we are hoping—I use that word deliberately—to see a Wylfa B in Anglesey. From talking to people in all parts of north-west Wales, there is a general opinion that such a development would be welcome. The development of a second Wylfa—a nuclear power station—in north-west Wales will lead to economic benefits across the region. Clearly, my constituents in Aberconwy who use the A55 will be able to travel to Anglesey and benefit from the economic opportunities that will be created as a result of a second power station at Wylfa.
I would like to make a slight diversion from the A55 because, when I put this speech together this morning, I was thinking of the fact that my constituents would have to travel by car to gain employment in Anglesey as we are hoping to see developments in that part of the world. However, there is another option. We could try to persuade the Department for Transport to invest in proper signalling for the north Wales coast railway line. I stress that the cost of improving the signalling on the north Wales coast railway line will be significantly less than electrification to south Wales.
I welcome electrification to south Wales. That project is an indication of the work that has been undertaken by the Wales Office to bring pressure to bear on the Department for Transport. However, in due course, I would like there to be an announcement about signalling on the north Wales coast railway line. I could then stand here and say that my constituents could travel from Aberconwy to take up economic and employment opportunities created in Anglesey.
The Anglesey energy island is a hugely beneficial project and an example of the public sector, the private sector, the Welsh Assembly, local authorities and the Westminster Government working together to develop real employment and economic opportunities for an area that desperately needs them. If the nuclear power station comes along and is the centrepiece of the development, it would create the opportunity for skills to be developed in engineering, mechanical engineering, planning and construction that will be relevant to tidal and wind power. Anglesey is leading with a holistic approach and we should look carefully at that. In Anglesey and the energy island project, we potentially have an example of best practice that could be rolled out to the rest of the United Kingdom. It would be a proud position to be in to be able to say that an example of best practice in economic development comes from Wales.
I specifically want to make the point that the officers who have driven this on behalf of the Welsh Assembly Government and particularly the officers working for the Isle of Anglesey county council deserve immense praise. I am sure that hon. Members realise that to be extremely effective as a team of officers when working for the Isle of Anglesey county council is some achievement. We should place on the record our appreciation of the work that has been done from an Anglesey point of view.
In addition, I would like to associate myself with the comments made by my hon. Friend the Member for Pudsey this morning. Another fantastic aspect of the energy island development in north-west Wales is the integrated approach to economic development. When the Welsh Affairs Committee went to Düsseldorf, I was really proud to meet RWE and E.ON UK. We had a presentation about the potential development of the nuclear power station in Anglesey and as part of that we were shown slides about their partner organisations in north Wales. It was very encouraging to see the names of Coleg Menai and Coleg Llandrillo from the National Skills Academy for Nuclear coming up on those slides and to hear German executives talking about the proactive way in which the further education community in north Wales was working with them to ensure that young people would have the right skills to work in that industry.
When we are talking about why the energy sector in north-west Wales, and the skills training to ensure that people with the relevant skills can take up the opportunities available in north Wales, are so important, all we need to do is look at the demographic picture in counties such as Conwy, Gwynedd and Anglesey, where there is a huge decline in the number of young people between the ages of 18 and 35. That decline has to be dealt with. I am fed up with hearing people talk about the decline of the Welsh language in rural communities and its heartlands, yet when we talk about real economic opportunities that will give those young people the option of remaining in the areas where they were born and having good employment prospects there, we often hear people carping about the nuclear industry being unsafe. My view is that we should talk to the people who are most affected by the development of a second nuclear power station—the people of north-west Wales. Generally speaking the view is very positive.
I do not want to go on about the Anglesey energy island in isolation, because, obviously, I represent the constituency of Aberconwy and we are very aware of the fact that, off the coast, we have a huge development in the Gwynt y Môr wind farm. It is a £2.2 billion development—a significant sum of money, again being financed by a German company. Gwynt y Môr is a 567 MW wind farm. It is located 13 km off the coast of my constituency in water depths of 12 to 28 metres. It is a huge engineering project and will be a substantial contributor to the energy needs of this country.
However, it is important to point out that, as hon. Members in this room know well, the Gwynt y Môr development was controversial. When asked to support the development, the local authority declined to do so, in a democratic decision. That decision was overturned by the then Secretary of State for Energy and Climate Change, who is now Leader of the Opposition, because the development was deemed to be of national significance. We can agree or disagree with that, but I associate myself with the Secretary of State for Wales, who has stated categorically that since the previous Administration has made the decision, it is imperative that the economic opportunities from the development of Gwynt y Môr are harnessed, and we ensure that local firms and local individuals looking for employment can benefit.
Ian Lucas: I am interested in the hon. Gentleman’s arguments. I am pleased to say that Prysmian Cables in Wrexham has tendered for—and been successful—the cabling for that project, which is an example of the economic benefit that Gwynt y Môr brings across north Wales.
Guto Bebb: I associate myself with those comments, and indeed, inasmuch as my constituents can travel down the A55 to Anglesey for employment opportunities, there are literally tens of people who travel down to Broughton, for example, to gain employment. Therefore the economic impact of large-scale projects in north Wales benefits the whole region. I accept that completely.
I have one concern. I believe that we have to make the best of this investment. We must put the past behind us, accept that that development is happening and concentrate on the economic opportunities it brings. However, time and again we have been told that where there are large sustainable energy developments in Wales, a community benefits package will be afforded to the local community.
The question I would ask my hon. Friend the Minister to raise on my behalf relates to the need for certainty on community benefits packages. I represent a constituency where there are great opportunities for renewable energy, whether hydro or wind power. The opportunities exist, but if local communities are to be persuaded of the merits of the arguments, they should be able to be confident that when a community benefits package is promised, it turns into reality when the planning permission is granted. I have raised the issue on two occasions, and I have had two different answers. In a parliamentary answer from the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry) I received a positive response to my complaint about compensation packages changing between pre and post-planning. It said:
After that, I took part in a Westminster Hall debate and raised the same issue. I am beginning to sound like a record, repeating myself. In that debate the response came from the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who stated that the Government want to spell out with rather more precision exactly how local communities may benefit from the approval of wind farm development and, where appropriate, enforce those rights.
There is a difference between the two responses, and my final plea today is for the Secretary of State and the Minister to raise the issue with their colleagues. There is great good will in my constituency for energy to be developed from alternative sources. Of course, as my hon. Friend the Member for Monmouth said, we cannot depend entirely on energy from renewable sources, which is why I am such a supporter of the nuclear power station at Wylfa, but it is important that when communities are persuaded to welcome wind farms and other alternative forms of energy they should have some certainty that the funds promised to them prior to planning consent being given are the same sums that will be provided after the event.
Nia Griffith: I would like first to make a couple of comments on feed-in tariffs, and then I shall move on to speak about the effect of the carbon floor price on our industry in Wales. I have in my constituency the former
Furthermore, there is a similar plan for an installation in Ffos Las, near the race course, which would use land that would probably struggle to attract anything else. Again, that is likely to be very acceptable to the local community. It seems a terrible shame that an excellent scheme, which offers opportunities for our own solar panel industry and which needs certainty of purchase to up its production, will be jeopardised and perhaps thrown out for the most spurious of reasons. There seems to be a complete misunderstanding of the scheme’s self-sufficiency in the long term, and how it is not a question of robbing Peter to pay Paul. It is quite possible for such schemes to go ahead simultaneously with those for individual householders.
I turn now to the significant impact that the carbon floor is likely to have on heavy industry, such as the Trostre steelworks in my constituency. I know that similar steelworks and energy-intensive industries throughout Wales are equally concerned. The Conservative manifesto pledged to reform the climate change levy to introduce a carbon floor price, but it made that look like a reform that could be achieved without spending Government money and without raising household bills, thanks to a system of bill rebates. However, on entering government, it was quickly accepted that the bill rebates included in the manifesto commitment were unworkable. It was also realised that the UK could not unilaterally put a floor under the European carbon market. Instead, a policy that effectively increases the cost of carbon for UK electricity generators was developed.
The stated intention of the reform in the manifesto was to provide a carbon price floor, or at least a stability mechanism, so that the total cost of carbon for generators could be more certain. In practice, the consultation simply proposed the introduction of another tax, this time on the fuel used by generators. The tax lever could be used to stabilise the cost of carbon, increasing the tax when the price of a carbon allowance was low and vice versa. However, the consultation document did not suggest any formal link between the two. As a result, investors would still face uncertainty over the cost of carbon, this time also consisting of political uncertainty over the level of the tax.
European legislation prevents the taxation of the generators directly. To get around that problem, the proposal intends to tax the fuels used by electricity generators. Different fuels will be subject to different rates of tax, with the tax rate based on the carbon content of each fuel type. The level of tax could be revised periodically in different ways, as laid out in the consultation, but the general idea is that the revised climate change levy on generators’ fuel could be raised incrementally to create an effective carbon price for
We understand that sometimes we have carbon leakage, where when we impose certain conditions, manufacturers choose to go to parts of the world where they can get away with less environmentally stringent conditions. They can therefore continue to produce the same amount of emissions, while we have lost that industry. Our worry is that we are putting ourselves not only in an uncompetitive position vis-à-vis the cheap countries in the world, but at a disadvantage in respect of our European competitors. That will substantially disadvantage some of the energy-intensive industries.
In its response to the consultation, which closed recently, Tata made those points clearly. The tax will impose an additional cost on energy-intensive industries, and it will affect not only the plant in Trostre in Llanelli, but the neighbouring blast furnace in Port Talbot. In the consultation document, there is no proper quantification of the impact of the carbon floor price on energy-intensive industries. In fact, Tata has found it rather insulting that the consultation makes unsubstantiated comments about passing on the cost to the consumer. It knows well that in a highly competitive global market, that is simply not an option.
“Other European operators are likely to remain operating under an ‘abatement at least cost’ regime, therefore exposing Tata Steel UK to a different cost pressure and impacting on our ability to compete even inside the single market.”
It pointed out that the purpose of the tax was to encourage low-carbon generation, but if there were to be a significant gap—perhaps 10, 15 or 20 years—between the implementation of the tax and the coming on stream of low-carbon types of generation, the industry would be very severely penalised in the medium term. It is deeply concerned that the carbon floor price will not deliver the desired investment growth. In other words, we are facing a situation where companies such as Tata Steel UK and other similar manufacturers could make long-term investment decisions based on what they see in the carbon floor price. They could turn away from the UK and decide that instead of building a new blast furnace in Wales, they will take those plans elsewhere.
That is a very stark message and I would like the Minister to take that back to his colleagues in the Department of Energy and Climate Change and point out that we need a proper understanding and assessment of what the impact will be on energy intensive industries such as the steel industry.
At the moment, given what we understand from the consultation document, we are talking about tens of millions of pounds of incremental costs to Tata Steel UK. Those costs are not faced by its European competitors, let alone by its global competitors. I ask the Minister to
Karen Lumley (Redditch) (Con): It is a pleasure to serve under your chairmanship, Mr Caton. It is good to be in my first Welsh Grand Committee and listen to the right hon. Member for Delyn as that is where I started my political career. He spoke very knowledgably.
Hon. Members from all parties, and wherever we come from in the UK, agree that we must increase our use of and investment in alternative energies, both to reduce our dependence on oil and our carbon emissions. The coalition Government are committed to creating a low-carbon economy. I believe that is the right way forward, and I would like to highlight the advantages both for Wales and the UK as a whole.
When planning to build new wind farms we must, where possible, encourage the use of British companies to build the turbines and run the farms. Wind farms must have the ability to stimulate the local economy, and that is where the benefits begin. It must be a competitive process, and we must ensure that our low-carbon economy will respond to a healthy and competitive market. Wind energy is a growing industry and must be supported and encouraged. Finding suitable sites to build new wind farms is a challenge and, as I have seen in my constituency, local opposition can often be ferocious. There has to be better consultation with local communities about onshore wind farms, and some locations are more appropriate than others. That is not to say that I do not support them—far from it. I do, however, believe that offshore wind farms have enormous potential in the UK, and I hope that they will play an increasing role in our energy supply in the future. Driving up and down the A55 one sees lots of wind farms, and when I lived in Wrexham we used to see lots of oil rigs.
Building wind farms is one strand in the Government’s energy plan, but we must also invest in nuclear energy. The Government have made clear their support for private firms that wish to build nuclear power plants. I give my full support to the Wylfa power station and the plans to build there. We need to get moving on providing alternative energy sources, and that is a fabulous place to start.
We have all seen how growing green industries stimulate our economy. This morning, the hon. Member for Wrexham—where I grew up and where my children were born—mentioned Sharp, the manufacturer of solar panels that has 300 new employees. That means that 300 families in that area now have an extra income, and more homes and businesses have been fitted with solar panels. That is great news for north Wales, and
Ian Lucas: It is a pleasure to follow the hon. Member for Redditch, who knows Wrexham, where she lost her council seat to a Labour candidate, well. I endorse much of what my right hon. Friend the Member for Delyn said about feed-in tariffs. Let me approach the matter from the perspective of having a Government who want to encourage economic growth and employment in low-carbon industries. That is what the Government say they wish to pursue at this particular time. We are all interested in creating jobs in our communities and constituencies. In that respect, I will refer to the solar energy industry in north Wales because it is particularly prominent in that area.
Sharp decided to make solar panels in Wrexham in 2004. The company has been in Wrexham since the 1980s when it arrived as inward investors. At the time, it was making video recorders—remember them?—and microwave ovens. As video recorders became less saleable, it was clear that, if the factory was to have a future, the company would have to introduce new products to Sharp in Wrexham. A great deal of hard work went in to bringing in photovoltaic cells to Wrexham in the early part of the decade. A big disadvantage at that time was that we did not have substantial demand for photovoltaic cells in the UK.
From 2001 to 2008, while I was on the Back Benches, I campaigned hard for the introduction of a feed-in tariff in the UK. I attended numerous meetings and was knocked back on many occasions. I say to the hon. Member for Aberconwy in relation to his campaign that one of the lessons in politics is never to take no for an answer. As far as the feed-in tariff was concerned, I had to attend many meetings and debates and ask many questions before it was introduced. I took my right hon. Friend the Member for Doncaster North (Edward Miliband), who was then Secretary of State for Climate Change, to see the Sharp photovoltaic cell battery in Wrexham. The feed-in tariff was introduced in the early part of 2010, and I like to think that that meeting that he had at Sharp was very influential in making the case for the feed-in tariff to support the photovoltaic cell industry.
Very few policies, when introduced, command cross-party support, but the feed-in tariff was one of them. There are even fewer policies that when introduced have an immediate beneficial impact in the way that the feed-in tariff has. Political policies often have a negative impact very quickly. They rarely have a positive impact very quickly. When the feed-in tariff was introduced last year, it had an immediate positive impact, which was confirmed in a parliamentary answer from the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle on 28 February. He said:
“The UK solar photovoltaic market has seen an increase in production capacity as a result of the introduction of the feed-in-tariff. Sharp reports increased production by 25% and Romag, operating in the north-east, are increasing production by 30%.”—[Official Report, 28 February 2011; Vol. 524, c. 241W.]
Earlier this year, 300 extra jobs were announced in the Wrexham plant, taking the number of people who work there up to 1,100. A very positive impact for a policy
There may well be legislative concerns about solar farms of the type that have been described, but the level at which the review is proceeding—50 kW—would prevent any reasonably sized community project from proceeding. I am advised that a project could have a base level of perhaps 3.9 kW per home. On that basis, 50 kW equates to 15 homes. So the level that is being considered at present is completely at odds with the realities of the market, and I implore the Government to make that point forcefully to the Department of Energy and Climate Change.
A company called Sharp in my constituency could have chosen to invest anywhere in the world. It has chosen to come to my constituency in Wales to invest private finance—not Government money; there are no massive grants or anything of that nature—to create jobs and employment in Wrexham. Within the past year, it has also built an education centre at the Wrexham factory—I urge all hon. Members to come and look at it—that describes the benefits of solar power. That company is bringing young people into that centre regularly to educate them.
Last month, on the Friday following the announcement, I attended the opening of a training centre for the individuals and small businesses that Sharp is encouraging to invest in installing solar panels on roofs. That creates jobs not just at Sharp and in Wrexham, but for the future. Such an approach creates jobs for electricians, roofers and contractors in the construction sector, which is very hard pressed at the moment, and is helping to provide the type of low-carbon energy jobs that we talk about all the time, but that are so difficult to bring to reality.
This is a real gift horse—a rare thing in politics—but we are seriously looking it in the mouth at the moment. The introduction of the feed-in tariff took so long, and I deeply regret the fact that it was not brought in earlier. I remember going to Germany in the early part of the past decade and talking to people there about the 100,000 roofs project, as it was referred to at that time. They talked about the certainty in the investment framework that was important in allowing people to invest in the industry. That certainty was created by the feed-in tariff.
For a party that purports to understand business, the Conservative party is undermining that certainty in the investment framework and has made a massive error. At the very time that business is choosing to invest because it knew that it had a stable framework, the Conservatives have created uncertainty by bringing forward the review. As we heard from my right hon. Friend the Member for Delyn, that review has undermined the investment framework.
Those projects were bringing new jobs—I am not just talking about Sharp; we have heard about Kingspan and others, and I have mentioned the roofers and electricians—that are desperately needed at the moment, and they need to be secure. If possible, can we please bring forward the review? The 50 kW limit is completely
David T. C. Davies: On a point of order, Mr Caton. I seem to recall that in the previous Committee sitting, for some reason, Members decided to pass a resolution condemning the Government. That had never been done in a Welsh Grand Committee before, but if a precedent has been set, I wonder whether I could propose a motion, praising the Government and the wonderful Secretary of State for Wales for her good work and cleverness in getting an electrification of the rail line as far as Cardiff.
David T. C. Davies: Further to that point of order, Mr Caton. The motion that was passed in the previous Committee sitting, if my memory serves me right, was not the motion that was on the Order Paper—it was critical of the Government. I should like to have the opportunity to do what happened at the previous sitting and move a motion in this sitting in praise of the Government.
Mr Llwyd: Further to that point of order, Mr Caton. Surely, a motion may be pressed to a vote at the conclusion of proceedings, which I believe is at 4.30 pm. It is premature to suggest that that should be done now.
Roger Williams: Thank you, Mr Caton, for dealing with that point of order. I have enjoyed this morning and this afternoon’s debate. It shows that we have lots of talent within Wales to take forward the new technologies and innovations on renewable energy. I have always said that Wales should be an entrepreneurial country. We are now coming out of recession, during which there are
I particularly enjoyed the speech of the hon. Member for Monmouth. I will shortly share a platform with him with the Abergavenny Friends of the Earth, and I was going to demonstrate how closely aligned coalition thinking was on a number of matters, but we might have to tease out a few minor differences in some of our approaches.
In the previous Parliament, I was a member of the Select Committee on Environment, Food and Rural Affairs. At the time, the Department for Environment, Food and Rural Affairs had more competence in energy than it did later on, when the Department of Energy and Climate Change took over some of its functions. Our Committee conducted a number of inquiries into energy issues. Climate change was the flavour of the month and the flavour of Parliament, and we tried to look at niche issues that other people were not looking at.
We conducted an inquiry into what we called the citizens’ charter, which was about how to get private individual and the citizen involved in mitigating climate change and producing renewable energy. We, like the hon. Member for Wrexham, went to Germany. We saw its feed-in tariff system and how it had been successful in not only getting individuals to produce their own energy, but taking forward a number of new technologies.
The hon. Member for Wrexham will remember that the Energy Bill, when first introduced, did not include feed-in tariffs. He and other hon. Members across the House believed that that was an omission and campaigned for them to be included. They will be a powerful tool in creating the type of industry that he wants. I understand his anxiety over the review, but I understand that when feed-in tariffs were introduced in other countries—they might not have been introduced at the right rate or given the right budget—they had a damaging effect on industry. There was a huge rush into production and the money ran out; after a few years there was nothing to sustain it.
Ian Lucas: It is possible that what the hon. Gentleman suggests happened in some places, but I assure him that Germany’s sustainable feed-in tariff system was expanded because of its popularity. Furthermore, manufacturing industry was created on the back of the introduction of the feed-in tariff. That would be so valuable for the UK.
Roger Williams: I accept what the hon. Gentleman says, but he will realise that we are working with rather constrained budgets, and we want to make the best use of them. I am sure that the message that he and the right hon. Member for Delyn have delivered today will be taken up by the Minister, and other Members are making the same point. We need a review of the feed-in tariff that is quick, effective and efficient as possible.
The other inquiry was on bio-energy—the production of heat and electricity from plant materials. Today, the renewable heat initiatives were announced. It will be a notable event for Wales. I have visited Port Talbot in the constituency of the hon. Member for Aberavon—he is not in his place—where such a facility is burning forest
I have read the Secretary of State’s announcement, although I have not seen the detail, but at a smaller scale, a go-ahead farmer, Edward Davis of Evenjobb in my constituency, is covering his chicken houses with photovoltaic cells. He is trying to keep under the 50 kW limit. He now wants renewable heat incentives; he produces a lot of heat in the chicken sheds to keep the little chicks going, and that air has to be removed. He wants to capture the heat from it and use it to heat the air that he feeds back in. He wonders whether the renewable heat incentive will cover that sort of technology. People are really inventive and innovative, and I am enthusiastic and hopeful about such things.
I move on to the setting up of technology innovation centres. The Government have announced that they will put forward £200 million over four years to sustain eight or nine centres, based on the Fraunhofer centre in Germany. There will be several components. There will be Government money from the research councils; as they spend money across the UK, it will be available in Wales. Money will also come from universities and private business. We, as Welsh constituency Members, as well as the Wales Office, should ensure that Welsh bids are made to set up technology innovation centres in Wales. As my hon. Friend the Member for Ceredigion pointed out, there would a wonderful opportunity in Aberystwyth. IBERS—the Institute of Biological, Environmental and Rural Sciences—is a go-ahead research organisation that does a lot of work on renewable energy. Perhaps I may be so bold as to suggest to hon. Members who represent north-east Wales that that would be a wonderful theme for a centre in north Wales. The photovoltaic industry is one of the few renewable energy sectors that makes real steps forward for technology to become more efficient, cost less and deliver more. We need to look at a technology innovation centre for Wales, and I will be very disappointed if we do not get one.
We all look forward to the green deal. Many constituency MPs will have met constituents who suffered greatly during the cold weather over the winter. We managed to increase the severe weather payment to £25, which was welcomed by our constituents. We must encourage better insulation for our homes. The green deal will work, but it needs more incentives and I would like the Government to look at that. One option could be to reduce stamp duty on those houses that meet a minimum energy efficiency. Another option, suggested by the Federation of Master Builders, would be to ensure that all materials that go into the green deal have a VAT rate of 5%, reflecting their contribution to energy efficiency. The Government should look at a number of those issues as they introduce the green deal to ensure that it takes off more effectively and efficiently.
I have one last point to make. This is not a reserved matter, but it is about planning. A number of hon. Members have mentioned the fact that, although everybody wants the new plants, they do not necessarily want them in their own constituency, or there is a planning problem about that. In my constituency, a family farming business—not a big farm—wanted to invest £2.5 million in an anaerobic digester. It took it three and a half years to receive yes as an answer. I do not comment on whether
Jonathan Evans (Cardiff North) (Con): I will be very disappointed if I take up all that time, Mr Caton. Making the last Back-Bench contribution provides an opportunity to reflect on observations made in other speeches. I was disappointed that the shadow Secretary of State for Wales, the right hon. Member for Neath, was not prepared to give way to me earlier. I wanted to congratulate him on making it clear that he recognises that the previous Government never made a financial commitment or put any resources towards the Severn barrage project. We all recognise that he is the most outspoken advocate of the Severn barrage project, although while sitting here during the debate I have reflected on the fact that there is one other advocate who is probably even more determined in her support, and that is Mrs Hain.
There is a great curiosity to consider. I look at the right hon. Member for Cardiff South and Penarth and remember that, when I first came to the House, he and I spent a good deal of time in Committee discussing legislation related to carrying forward the Cardiff bay barrage, of which he was a determined supporter. I seem to remember that there was rather less support from his fellow Cardiff MP, Rhodri Morgan, and from the right hon. Member for Neath. It is a curiosity and an irony that every building that has opened at Cardiff Bay since that time has had pictures of the glowing, smiling faces of those two individuals. That event would not have taken place without the efforts of the right hon. Member for Cardiff South and Penarth.
Alun Michael: I am grateful to the hon. Gentleman for provoking me. He referred to the Severn barrage and the question of financial commitment. The point is that a private sector consortium is investing money in the work that would lead to the point where we could take a decision on whether the Severn barrage should go ahead. The decision of this Government has been to curtail that, even before it has got to the point where it is appropriate for this place to be taking decisions.
Jonathan Evans: The right hon. Gentleman has the disadvantage that he was not here during that particular exchange, when it was clear that the objection of the shadow Secretary of State is that my right hon. Friend the Secretary of State did not automatically override all the planning processes and give the green light, ignoring all the proper ministerial responsibilities that she has.
I want to get to the main thrust of what I want to say, if my hon. Friend the Minister will excuse me, because we are running short of time. I have been listening to the debate and I must say that I take a much less benign view of the structure of our electricity market in the UK than appears to be the case for many hon. Members who have contributed.
We know that reform of the electricity market is taking place. Curiously enough, that reform—the consultation—ends today. The reform is being driven by the need significantly to increase the number of investors and the capital available for new renewable energy production and transmission. The numbers involved are mind-boggling. By 2020, those factors have to increase by almost double—we need to double our production. Ofgem has estimated that the investment needed may be in the order of £200 billion. Ernst and Young has suggested that it could be significantly more than that in the 10 years thereafter—the figure could go up to as much as £450 billion. From Ernst and Young’s report, it is clear that that investment cannot be produced, even by the companies that are now in the market.
A number of companies are looking to participate in this market opportunity, including a number of interests in Wales. However, I understand from those prospective investors that the obstacle to investment as they see it is the failing structure of our electricity market here in the UK and in Wales. That is why I applaud the Secretary of State for Energy and Climate Change on launching this review.
As I suggested, one of the failures of the privatised electricity structure is the market dominance of the supply and transmission networks, which have effectively become privatised monopolies. [ Interruption. ] Yes, the hon. Member for Arfon is right. It might well be that that the Office of Fair Trading is saying that there is competition elsewhere in the market, but that is not the case in this sector. It is a scandal that more than half the companies involved in this part of the market have been targets for investigation by the regulator, Ofgem. Several have been fined sums that run into the millions.
The issues we are considering are abuse of market position, manipulation of prices, mis-selling to consumers and profiteering. I am a committed supporter of market economics, but my problem is that those companies are not subject to proper market disciplines and are viewed as money-printing opportunities. In the UK, we have 14 transmission regions and fewer than that number—just seven company groups—have the licences to supply electricity through those networks. It is of little surprise to find that few of them are UK based—we have companies from Europe and elsewhere, such as the United States. I hope that the Secretary of State for Energy and Climate Change will respond to widespread concerns that have been raised about the market dominance of these licence holders and subject the current arrangements to a full-scale re-examination.
In south Wales, we have a licensed, monopolist electricity distributor, which chooses to base itself outside Wales, in Bristol. It is controlled from Pennsylvania in the United States of America. Every approach by our local media to that company and its professional advisers in relation to local concerns just draws a terse “no comment.” It employs excellent IT staff who produce mind-boggling
I was astounded to find when I looked through the legislation that the only way the licence can be taken away from those companies is by mutual agreement. We must demand much higher standards from those companies that are licensed by the Government. We must create a much tougher regime, and we must be prepared to revoke licences when such companies abuse their position, instead of just applying meaningless fines. Companies that are subject to Ofgem investigation should know in future that revocation of their licences is a measure that the Government are prepared to add to Ofgem’s powers and subsequently to see enforced.
I touch briefly on some of the remarks from the hon. Member for Arfon on fuel poverty. I will not go into what that is, because all hon. Members in the Committee know, but we have had commitments in legislation since 2000 to address that. Members on the Government Benches care about that as much as Opposition Members. There is a commitment to eradicate fuel poverty by 2016. Curiously, for reasons that I do not altogether understand, the fuel poverty strategy for Wales has a target of 2018. I thought that that was a typographical error, but I subsequently discovered that it is right. I do not quite know why the Welsh Assembly thinks it is right to aim to eradicate fuel poverty two years after we aim to do so in the rest of the UK.
The bottom line is that we are going in the wrong direction. A report last year made it clear that we started with 2 million UK citizens in fuel poverty in 2004. There were 2.5 million in 2005, 3.5 million in 2006, 4 million in 2007, and 4.5 million in 2008. The projected figure for 2009, which will be published later this year, is 5 million people living in fuel poverty.
I applaud the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle, who recently reiterated that it is the coalition Government’s commitment to match that 2016 target, but we must ensure that it is delivered. I support the Government’s refocusing of support under the Warm Front scheme to those who need help, but there is a much greater responsibility on the energy companies that are too often guilty of cheating vulnerable customers instead of trying to help them. I do not expect Ministers to come back in 2016 and say that they did their best but, as the Labour Government said last year, that they were defeated by rising energy prices. I must tell the Secretary of State and my hon. Friend the Minister here today that those excuses of the last Administration are just not good enough.
Owen Smith (Pontypridd) (Lab): It is a great pleasure, Mr Caton, to serve under your chairmanship today. I think everyone will agree that we have had a varied debate. I have enjoyed many of the contributions, and a favourite was that of the hon. Member for Monmouth,
The hon. Member for Cardiff North made an interesting contribution. It was fascinating that he should launch such a passionate attack on abuse by the dominant position of capitalist, privatised electricity companies. They were privatised under the Tory Government, and it is precisely because of such fears that we oppose the privatisation in the NHS and elsewhere that is coming from the Government—[ Interruption. ] It is a legitimate observation. I support him in his views about cartel behaviour. I also support the comments by the hon. Member for Arfon about LPG companies and the disgraceful way in which they have been ripping off customers, particularly in rural Wales.
As ever, it is a pleasure to precede the Minister. Too infrequently do we have the chance to speak in the Welsh Grand Committee. Between sittings, I miss the humour and lightness of touch that he brings to these occasions—so much so that I have recently taken to following him on Twitter so as to keep up with his wit and wisdom. I had a couple of recent insights. One was:
In all seriousness, I was looking in the blogosphere, Twitter and elsewhere for insights into the Minister’s and the Secretary of State’s energy policy. I did not find much, although I found a lot of pretty bold rhetoric, most notably the Secretary of State’s recent observation about Wales:
“Surrounded by wind, wave and tidal resources, we are in a prime position to be able to benefit from investment in the green economy whilst making a significant contribution to the government’s carbon reduction targets through safe, clean renewable means.”
None of us would disagree with that; it is a statement of fact. However, we disagree about the policies and decisions that have been put in place—rather, that have not been put in place—to turn that rhetoric into reality. They are invisible to all.
We do not agree that the Government are delivering on their promise for Wales. Today, we heard that the gap is enormous between the rhetoric—that they are the greenest Government ever—and the reality. It includes the cancellation of the Severn barrage, which would have gone ahead had we taken power— [Hon. Members: “It is not a cancellation.”] We keeping hearing that it is not a cancellation, but I do not see the barrage being built when I visit my parents at Barry. I suggest that we would have seen it had this Government not come to power on 5 May last year.
The gap also includes the handicapping of community electricity projects and photovoltaic businesses because of the crazy review of the 50 kW level for feed-in tariffs, which was to the disadvantage of Welsh ports in developing wind turbine manufacture and maintenance.
The Government’s record on energy in Wales is lots of hot air but no turbines. We should not be surprised that a Tory Government are taking short-sighted decisions. They are the people who shut the pits in Wales— [ Interruption. ] That is true; it was a short-sighted decision by a previous Tory Government. We sit on top of 250 million tonnes of coal. Given the energy crisis, the security worries and the potential for carbon capture, we could have been mining it right now. It was a short-sighted decision, and there have been many more.
David T. C. Davies: The hon. Gentleman cannot get away with such historical inaccuracies. He must be aware that many more pits were shut under the Labour Government in the 1960s than were ever closed by Mrs Thatcher’s Administration in the 1980s.
Owen Smith: No, they were shut because of economic circumstances, not closed down as we saw under Mrs Thatcher. Everybody in Wales will know that. People do not need to read history books; they simply need to remember. In communities such as mine in Pontypridd, people recall the reality of what the Tory Government did when they were last in power in Wales, and people are fearful today. That is precisely the sort of past to which we will be returning.
The Severn barrage was the world’s largest green energy project, with the potential to produce 5% of the UK’s energy needs—the equivalent of two nuclear power stations, with hundreds of good-quality jobs—and it was clearly a no-brainer to press ahead with the decision. Indeed, in October, the Minister wrote about tidal power—not on Twitter this time—saying that it was
Ports are a critical issue. Many members of the Committee have mentioned the fact that the Labour Government had announced a fund of £60 million available to all ports across the UK. They highlighted Welsh ports in particular, capitalising on the fact that those ports sit in ideal locations, given the arrays in the Irish sea and around Lundy in the Bristol channel, to manufacture and service wind turbines. The Opposition were shocked when, without any explanation, the decision was taken to renege on that position and to provide that money for only English ports, leaving Holyhead and Milford Haven fundamentally disadvantaged.
Let us put straight the Labour record on electrification, an area on which we have also heard a lot today. I fear the Government’s misrepresentation on rail electrification.
Owen Smith: No, because we did not say that we were going to electrify to Pontypridd. One of the things that I am delighted about is the prospect of electrification as far as Pontypridd, although it is a prospect, not a reality. One of the other smoke and mirrors that we have seen from the Government in recent weeks, which was blown to cover the fact that we were not going as far as Swansea, was the promise of jam tomorrow for electrification of the valleys line. It would be terrific if it happened, but all that Ministers have committed to is to work with the Welsh Assembly to develop a business case. Well, our Government developed a business case for going as far as Swansea. So did Network Rail, which said that we should be going to Swansea. We cannot trust the Government on the issue. If it happens, we will be delighted, but we will wait to see whether it is delivered.
Feed-in tariffs are another enormously important issue in Wales. All of us have, in our communities, the prospect of community-driven energy schemes predicated on the feed-in tariff and the energy that can be generated by photovoltaic cells. We were absolutely astounded that the blunt tool used by the Government to try to crack what is potentially a problem regarding solar farms on brownfield sites was to review the entire stratum of the framework. It does not make any sense and it is damaging, as we have heard, to great companies such as Kingspan and Sharp. It hamstrings the prospect of Wales benefiting from a new cluster of photovoltaic energy and damages communities such as mine and those of many hon. Members here, who had the prospect of new community electricity generation. That would have generated vital revenue and combated fuel poverty, which are two other issues that we heard about in relation to some of the communities in Wales that are most in need.
I urge, as my right hon. Friend the Member for Delyn and my hon. Friends the Members for Wrexham and for Llanelli have done, the Minister to return to his colleagues at DECC, look again at the mechanism that is being deployed to try to tackle the issue and determine a different way forward. If we do not do that, it will be another short-sighted decision that sees us missing out.
Many of the decisions have been met with widespread criticism in Wales. We have heard some of them described today. My right hon. Friend the Member for Delyn quoted a colleague working in the photovoltaic industry in his constituency, who referred to the ill-conceived and dangerously short-sighted measures that are being pursued. Such measures harm our environment and handicap our economy.
Over the weekend, the Prime Minister declared war on the enemies of enterprise, as he put it in his speech in Cardiff. However, I would put it to him that in Wales, those enemies are not, as he implies, in local government, the National Assembly or the civil service. As far as enterprise and the economy in Wales are concerned, the enemies are sat around the Cabinet table at Transport, Energy and the Wales Office.
In conclusion, I urge the Minister to be a friend to Wales and to take back to his colleagues the concerns that he has heard today. He should think again about preparing our ports for the offshore wind turbine revolution; about harnessing the power of our seas and delivering on the lagoons or a barrage as promised; about the feed-in tariffs and the impact of the review; about the fuel poverty that is blighting so many of our constituencies; about the need to reduce VAT on petrol; and about the rail electrification through to the “ugly, lovely town” in the west of Wales.
Mr David Jones: I thank you, Mr Caton, for your chairmanship this afternoon. Once again, the Welsh Grand Committee has produced a varied and interesting debate on an area—energy—which is, principally, undevolved. It serves to highlight the importance of this Committee in the public life of Wales. I can assure the Committee that under the leadership of this Secretary of State, the Welsh Grand Committee will go from strength to strength.
The opening speech of my right hon. Friend the Secretary of State highlighted not only the challenges facing Wales and the country as a whole in terms of the need to de-carbonise and to provide reliable and secure sources of generation, but the opportunity that those challenges present to Wales. I have to confess to being somewhat disappointed by the response of the shadow Secretary of State, the right hon. Member for Neath. I will pass briefly over his predictably curmudgeonly remarks about the announcement of the electrification of the Great Western line into south Wales, which I would have thought was, in anyone’s terms, a good news story. I must express my surprise at the degree of opportunism when he referred to the increase in road fuel prices, which was remarkable even by his own standards. Of course fuel prices are high; we know that. There are a number of reasons for that. The principal one is the underlying price of oil. This morning, the price of Brent crude was trading at something like $115 a barrel. That is an increase of something like 35% over 12 months, and that is the main reason that fuel prices are so high.
Mr Jones: I will not because I want to address the hon. Gentleman’s points, and I am sure that he is more interested in that than knockabout. The right hon. Member for Neath also mentioned fuel duty. I have to remind the Committee that the fuel duty escalator is Labour’s escalator. It was imposed by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Hon. Members will also know that my right hon. Friend the Chancellor is currently looking at the issue of whether the escalator should be implemented in April. We will have to wait for the Budget for that.
The right hon. Member for Neath also mentioned VAT, criticising the Government for the 2.5% increase. Whenever Opposition Members mention the issue of VAT, they should ask themselves why we need to increase taxes. We need to increase taxes to reduce the deficit, and that deficit is Labour’s deficit. It is interesting to note that although Opposition Members are quick to criticise any measures aimed at deficit reduction, they are always totally unwilling to say how they would achieve that themselves. Deficit denial is endemic on the Opposition Benches. Unless they can be sufficiently courageous to acknowledge that the deficit exists and needs to be reduced, and come up with credible plans of their own as to how that should be done, they are in no position to criticise any of the necessary fiscal measures that this Government have put into place.
The right hon. Gentleman mentioned—as did the hon. Member for Pontypridd—the Severn barrage, and I will commend him for the fact that, on this issue, if none other in his career, he has shown huge consistency. He is a supporter of the Severn barrage and indeed there is much to recommend it. However, the Government do not consider that the potential merits of the project are sufficient to commit any public money to it. Notwithstanding what the right hon. Gentleman had to say, there is nothing whatever to prevent the private consortium he mentioned from making its application to the Infrastructure Planning Commission to gain consent for the project under the single consent regime. The Government have not ruled that out. If the right hon. Gentleman would wish to encourage potential developers to make such an application, it will be dealt with by the IPC in accordance with the usual procedure.
The right hon. Gentleman also mentioned, as did several other Members, including my hon. Friend the Member for Aberconwy, the energy island concept. This is a concept that the Government recognise and welcome. Wylfa, as we know, has been identified as one of the eight potential sites for nuclear new build. I agree with my hon. Friend that the economic benefit of Wylfa B would be felt not only on the Isle of Anglesey, but across north Wales as a whole. It is a huge pity that the previous Government set their face against nuclear power. The 2003 energy White Paper concluded that nuclear was an unattractive option. It was not until 2007 that Labour recognised that nuclear had the potential to provide reliable carbon-free generation. For some 10 years after the 1997 election, this country was without any coherent policy on nuclear generation. The consequence is that the power stations are closing with nothing to replace them. That is the legacy that Labour left on nuclear.
The hon. Member for Arfon raised the issue of the cost of LPG, the so-called off-grid energy. I fully agree with him that that is a significant problem and it is experienced by many of my rural constituents. There is a huge challenge in supplying heating oil and LPG to rural communities. He will wish to know that the Office of Fair Trading is currently consulting on its annual plan to help to determine its work programme from
I want to deal with the points on PV energy raised by the right hon. Member for Delyn and the hon. Member for Wrexham. They are both sensible Members whose views I respect greatly. I have no problem in raising the issues with the Department of Energy and Climate Change. I look forward to visiting the Kingspan factory with the right hon. Gentleman, without photographers, to hear what the people there have to say. I understand that colleagues in DECC are working closely with Kingspan on the review. There was a meeting last week to attempt to find a way forward. I hope that that is of some consolation to him. The Government are very supportive of the PV industry in Wales as a whole and in north Wales in particular. It is a huge asset to the economy of Wales. We will do as much as we possibly can to support it.
I was encouraged to hear that Sharp recently issued a press notice saying that the extra 300 jobs created at the factory are safe. I hope that that is of some reassurance to the hon. Member for Wrexham. There is an issue, and it is one that I am happy to address and to discuss further to see whether we can find a way forward.
My hon. Friend the Member for Aberconwy raised the issue of community benefits of wind farms. He is absolutely right. This is an important issue. To quote the hon. Member for Pontypridd, it always seems to be jam tomorrow. I believe that it is right that communities hosting renewable energy projects should be rewarded for the contribution that they make to wider society. Many wind farm operators are already providing generous benefit packages to local communities, but planning applications for projects over 50 MW in England and Wales must provide a statement of community engagement. We propose to introduce a similar measure for smaller projects in England through the Localism Bill. It is a huge shame that the Welsh Assembly Government decided not to adopt this aspect of the Localism Bill, which I believe would have been a huge advantage to the people of Wales.
This has been an interesting debate, expertly chaired, with some excellent contributions. I believe that it has made an important contribution to the debate on energy in Wales, which is of such enormous importance to the Welsh economy—
14. Mr David: To ask the Secretary of State for Energy and Climate Change, what discussions he has had on the relationship between the Infrastructure Planning Commission and the Welsh Assembly Government in relation to major energy projects; and if he will make a statement. 
Charles Hendry: The Planning Act 2008 provides a statutory framework to ensure Welsh issues are properly considered. The Welsh Assembly Government have nominated eight commissioners to participate in examinations for applications in Wales. The Government have established an integration group, with representation from the Welsh Assembly Government, to ensure the fast track processes of the IPC are seamlessly transferred into a new Major Infrastructure Planning Unit within an integrated Planning Inspectorate.
Charles Hendry: Our consultation on electricity market reform, which was published on 16 December, outlines reforms aimed at moving the UK to the front of the global race for electricity investment, driving the growth of clean energy industries in the UK, and ensuring the best possible deal for consumers.
We believe that the proposed policies set out in our consultation document and evaluated in the accompanying impact assessment will deliver the investment needed to
16. Mark Tami: To ask the Secretary of State for Energy and Climate Change, what recent assessment he has made of security of supply in electricity generation; and if he will make a statement. 
Charles Hendry: Capacity margins are at historic highs. However, by 2018, 19 GW of capacity, roughly 25% of Britain's current generation, will close. Over 22 GW of new plant is under construction or has planning consent, but the electricity market reform consultation document has raised the need for backup generation due to the shift towards intermittent low-carbon power.
This investment challenge would strain the current system as we move into the 2020s, so the EMR seeks to establish a market design that provides the right investment signals for new baseload and flexible plant so we can decarbonise our power supply while maintaining its security now and in the long term.
Charles Hendry: We have received a range of representations since the Secretary of State for Energy and Climate Change announced the start of the first review of feed-in tariffs last month. Detailed proposals on the fast-track element of the review are being developed and we intend to publish them for consultation later this month.
|©Parliamentary copyright||Prepared 11th March 2011|